Short Update on the KSU Odyssey

Tony Hatch - ABH Consulting

Aug 13, 2021

Greetings;

From the Tweets:

(Monday) KSU saga gets a new twist or 2 – CP formerly files raised bid – enuff for KSU shareholders in their vote 8/19? Well, the key is the STB VT decision – and now STB says the decision, expected last month, will be “no later than 8/3”! View that as a 1-finger salute to the Street.
(Tuesday) As we figured, CP noted ISS’s clue (provide an “actionable alternative” bid) & raised its bid for KSU from ~$25B to $27B, narrowing the gap to CN’s ~$30B bid that may -MAY-have political/time risk pending STB VT verdict (SOON?) Enough? The ball’s (always) in STB court.
KSU retains its support for CN deal over CP but will adjourn shareholder vote (8/19) until after STB V/T decision by 8/31 – NOTE the 1-finger salute impact (after?) both proxy advisors, citing CP’s new offer and the STB’s refusal to play ball with the timing, changed their advice from “YES” to the CN proposal to “abstain”, which always made sense to me (in terms of accumulating all of the facts prior to the vote).

Some thoughts:

A special “Field of Dreams” BOO to the WSJ which followed up its overly sensationalistic coverage of the railroads being in the Biden Executive Order (1 of 72, hardly “singled out!!) with a Heard on the Street that stated that CP didn’t understand “game theory” and risk/arb (tainting an otherwise reasonable question of why raise their bid when they are playing a political strategy, ignoring the ISS “advice”). While I have long said that risk/arb isn’t my game (or that of any railways analyst – don’t believe the hype), I will also say that CP has played their underdog role rather well….
Don’t you think that the five (5) STB commissioners have made up their minds already? And remember, all of the subsequent commentary (such as Congressman DeFazio’s comments) is – supposedly – moot
STB Chairman Martin Oberman will be speaking at NARS next month, and at RailTrends (www.railtrends.com) in NYC in November….I am not making a direct comparison, but they used to say of Andy Warhol that he would “attend the opening of an envelope”….It will be interesting to reflect on Oberman’s commentary after we see the decisions (on KSU, PAR, WC, Massena, access, etc) so re/de-construct the clues….