KANSAS CITY, MISSOURI, US — The board of directors of Kansas City Southern on May 21 unanimously determined that the acquisition proposal KCS received from Canadian National Railway Co. (CN) on May 13 continues to constitute a “company superior proposal” to that of the offer submitted by Canadian Pacific Railway Ltd. As a result, KCS said it has terminated its merger agreement with CP and entered into an agreement with CN.

Under the terms of the CN merger agreement, each share of KCS common stock will be exchanged for $200 in cash and 1.129 shares of CN common stock, which implies a total enterprise value of $33.6 billion. The transaction remains subject to KCS stockholder approval and approval by the Surface Transportation Board of CN’s proposed voting trust.

In connection with the termination of the CP merger agreement, KCS said it has paid CP a breakup fee of $700 million, which will be reimbursed by CN. KCS will be obligated to refund this amount under certain limited circumstances, including if KCS terminates the CN merger agreement to accept a superior proposal, KCS said.

“As North America’s most customer-focused transportation provider, we are excited about this combination with CN, which will provide customers access to new single-line transportation services at the best value for their transportation dollar, and increase competition among the Class 1 railroads,” said Patrick J. Ottensmeyer, president and chief executive officer of KCS. “Our companies’ cultures are strongly aligned, and we share a commitment to environmental stewardship, safe operations, reliable service and outstanding performance. As a larger continental enterprise with complementary routes and an enhanced platform for revenue growth, capital investment, and job creation, we will be positioned to deliver on the transaction’s powerful synergies which will create new growth opportunities for our customers, employees, labor partners, communities and shareholders.”

JJ Ruest, president and CEO of CN, added, “We are thrilled that KCS has agreed to combine with CN to create the premier railway for the 21st century. I would like to thank the numerous stakeholders of both companies who have demonstrated overwhelming support for this compelling combination, and we look forward to delivering the many benefits of this pro-competitive transaction to them. I am confident that together with KCS’ experienced and talented team, we will meaningfully connect the continent — enhancing competition, offering more choice for customers, and driving environmental stewardship and shareholder value.”