CN, Burlington Northern plan to merge

TORONTO (Dec. 20, 1999) — Canadian National Railway Co. and Burlington Northern Santa Fe Corp. plan to merge, uniting Canada’s biggest railway with the second-largest in the United States.

The deal, which comes nearly six months after CN’s purchase of Illinois Central created the sixth largest railroad in North America provides no premium to shareholders of either company, the two railroads said in a statement. Shareholders of Burlington Northern would own about two-thirds of a new company, North American Railways Inc., to be based in Montreal. Paul Tellier, currently president and chief executive at Canadian National, will become president and chief executive of the new railway and CN. The 15-member board will have a Canadian majority.

The company would have annual revenue exceeding $12.5 billion, and “a strong balance sheet, substantial free cash flow, a shared commitment to consistent on-time customer service, a common operating system and a well-balanced revenue portfolio,’ the companies said in a statement.

The company would have 50,000 miles of track linking the Great Lakes auto industry and Texas chemical markets to coal, lumber and port centers in the Western U.S. and Canada. There is little overlap of the two networks.

Burlington Northern would remain based in Fort Worth, Texas, and become a subsidiary of Montreal-based North American Railways. Canadian National will exist as a separate company, and shareholders of each will have having voting and ownership interests in both companies.

The deal, which has been approved by both boards, is expected to close by mid-2001. However, it is expected to face stiff opposition by Union Pacific, Canadian Pacific Ltd., or other rivals

Burlington Northern holders will receive for each of their shares a security that combines one North American Railways common share and one Canadian National voting share. Canadian National shareholders get 1.05 voting shares and either 1.05 shares of the new company or 1.05 Canadian National common shares that can be exchanged for the new company’s stock.