UK hedge fund manager Chris Hohn has demanded that Canadian National (CN) abandon its current US$34 billion pursuit of US railway rival Kansas City Southern, reported The Financial Times.
TCI has taken issue with CN’s plan to create a voting trust, whereby shareholders in KCS would be paid before the transaction had received full approval from the Surface Transportation Board, the main railway regulator.
Voting trusts are vehicles that allow a buyer of an asset to immediately pay the shareholder of the target company, while regulators investigate the merger proposal. During this process the companies seeking to merge continue to be operated independently.
In March, rival Canadian Pacific (CP) agreed to pay US$29 billion in cash and stock to buy KCS, in a deal that also included the use of a voting trust. TCI is also the largest shareholder in CP, with an 8.4% stake worth US$4.3 billion, according to S&P Capital IQ.
Last week, CN made a US$34 billion cash-and-stock offer that the board of KCS stated was superior to the existing agreement with CP. KCS stated that it had notified CP that it had until this Friday, May 14, to improve its offer or it would terminate that deal in favor of the CN bid.
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