Sec Form 13D Filing - TCI Fund Management Ltd filing for CANADIAN NATIONAL RAILWAY CO (CNI) - 2021-08-31

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
SCHEDULE 13D/A
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a)
Under the Securities Exchange Act of 1934
(Amendment No. 1)
Canadian National Railway Company
(Name of Issuer)
Common Shares, No Par Value
(Title of Class of Securities)
136375102
(CUSIP Number)
Mr. Christopher Hohn
TCI Fund Management Limited
7 Clifford St
London W1S 2FT, United Kingdom
44 20 7440 2330   with a copy to:   Eleazer Klein, Esq. Schulte Roth & Zabel LLP 919 Third Avenue New York, New York 10022 (212) 756-2000
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
August 31, 2021
(Date of Event which Requires
Filing of this Schedule)

 

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box. ☐

 

NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent.

 

(Page 1 of 6 Pages)

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The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

 

1	NAME OF REPORTING PERSON TCI Fund Management Limited
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP		(a) ¨ (b) ¨
3	SEC USE ONLY
4	SOURCE OF FUNDS AF
5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)		¨
6	CITIZENSHIP OR PLACE OF ORGANIZATION United Kingdom
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH	7	SOLE VOTING POWER 0
	8	SHARED VOTING POWER 36,611,825
	9	SOLE DISPOSITIVE POWER 0
	10	SHARED DISPOSITIVE POWER 36,611,825
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON 36,611,825
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES			¨
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) (see Item 5) 5.2%
14	TYPE OF REPORTING PERSON CO

 

 

 

 

1	NAME OF REPORTING PERSON Christopher Hohn
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP		(a) ¨ (b) ¨
3	SEC USE ONLY
4	SOURCE OF FUNDS AF
5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)		¨
6	CITIZENSHIP OR PLACE OF ORGANIZATION United Kingdom
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH	7	SOLE VOTING POWER 0
	8	SHARED VOTING POWER 36,611,825
	9	SOLE DISPOSITIVE POWER 0
	10	SHARED DISPOSITIVE POWER 36,611,825
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON 36,611,825
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES			¨
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) (see Item 5) 5.2%
14	TYPE OF REPORTING PERSON IN

 

 

 

The following constitutes Amendment No. 1 to the Schedule 13D filed by the undersigned ("Amendment No. 1"). This Amendment No. 1 amends the Schedule 13D as specifically set forth herein. Capitalized terms used herein and not otherwise defined in this Amendment No. 1 have the meanings set forth in the Schedule 13D.

Item 3.

SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.

 

Item 3 of the Schedule 13D is hereby amended and restated in its entirety as follows:

The 36,611,825 Shares reported herein as beneficially owned by the Reporting Persons were purchased using working capital of the TCI Funds and Accounts at an aggregate cost of approximately $3,502,135,504, excluding brokerage commissions.

Item 4.

PURPOSE OF TRANSACTION.

 

Item 4 of the Schedule 13D is hereby amended and supplemented as follows:

On August 31, 2021, the Reporting Persons sent to the Company’s Chairman of the Board of Directors (the “Board”) a letter (the "August 31, 2021 Letter") and a presentation (the “August 31, 2021 Presentation”) setting forth their view that it is in the best interest of the Company and its shareholders for the Board to seek (i) to withdraw from the merger agreement entered into on May 21, 2021 with Kansas City Southern (“KCS”) that provides for the acquisition of KCS by the Company, because continuing to pursue such acquisition in the face of explicit opposition from the Surface Transportation Board of the United States would be hugely damaging to the reputation of the Company and potentially financially disastrous due to uncertainty over the approval process and the interpretation of the new merger rules; (ii) to hold the senior management and the Board accountable for its egregious failure of oversight in sanctioning the bid, together with potential fees of CAD$2 billion, by replacing the Chairman of the Board; (iii) to improve the Company’s commercial operating performance by replacing the current Chief Executive Officer, Jean-Jacques Ruest, with Jim Vena, who has a proven track record as an exceptional operator; and (iv) to add the necessary railroad experience and expertise to help the Board evaluate and address opportunities for shareholder value creation. A copy of the August 31, 2021 Letter and a copy of the August 31, 2021 Presentation are filed herewith, respectively, as Exhibit 2 and Exhibit 3 and are incorporated by reference herein.

Item 5.

INTEREST IN SECURITIES OF THE COMPANY.

 

Items 5(a), (b), (c) and (d) of the Schedule 13D are hereby and amended and restated in their entirety as follows:

(a) The aggregate percentage of Shares reported to be beneficially owned by the Reporting Persons is based upon 707,900,000 Shares outstanding which is the number of Shares reported to be outstanding as of July 20, 2021, as reported in the Company's Form 6-K filed with the Securities and Exchange Commission (the "SEC") on July 20, 2021.

As of the date hereof, the Reporting Persons may be deemed to beneficially own 36,611,825 Shares, representing approximately 5.2% of the Shares outstanding.

TCIF UK is the investment manager of the TCI Funds and Accounts. Christopher Hohn is the Managing Director of TCIF UK. By reason of the provisions of Rule 13d-3 of the Act, Mr. Hohn may be deemed to beneficially own the Shares held by the TCI Funds and Accounts.

  

The filing of this statement should not be construed as an admission that any of the Reporting Persons is, for the purposes of Sections 13 of the Securities Exchange Act of 1934, the beneficial owner of the Shares reported herein.

(b) The Reporting Persons have shared voting and dispositive power over 36,611,825 Shares.

(c) Information concerning transactions in the Shares effected by the Reporting Persons since the filing of the Schedule 13D is set forth in Schedule A hereto and is incorporated herein by reference. All of the transactions in Shares listed hereto were effected in the open market through various brokerage entities.

(d) No person other than the Reporting Persons is known to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the Shares. 

Item 7.

MATERIAL TO BE FILED AS EXHIBITS.

 

Item 7 of the Schedule 13D is hereby amended and supplemented by the addition of the following:

Exhibit 2:		August 31, 2021 Letter.
Exhibit 3:		August 31, 2021 Presentation.

 

 

 

SIGNATURES

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

Dated: August 31, 2021

 

 

TCI Fund Management Limited
/s/ Christopher Hohn
Name: Christopher Hohn
Title: Managing Director
/s/ Christopher Hohn
Christopher Hohn

 

 

 

 

Schedule A

Transactions in the Shares of the Company Since the Filing of the Schedule 13D

The following tables set forth all transactions in the Shares effected since the filing of the Schedule 13D by the Reporting Persons. Except as noted below, all such transactions were effected in the open market through brokers and the price per share is net of commissions. The price reported in the column Price Per Share ($) is a weighted average price . These Shares were purchased in multiple transactions at prices between the price ranges indicated in the column Price Range ($). The Reporting Persons will undertake to provide to the staff of the SEC, upon request, full information regarding the number of Shares sold at each separate price.

Trade Date	Shares Purchased (Sold)	Price Per Share ($)	Price Range ($)
8/30/2021	83500	138.122	137.734 - 138.733	*
8/30/2021	6500	138.854	138.740 - 139.040	*

 

 * Trades executed in Canadian dollars.

 

Exhibit 2

 

 

 

 

 

Board of Directors

Canadian National Company

935 de La Gauchetière Street West

Montreal

Quebec H3B 2M9, Canada

Attn: Robert Pace, Chairman of the Board

31 August 2021

Dear Chairman Pace and members of the Board of Directors (the “Board”) of Canadian National Railway Company (“CN” or “Canadian National”):

TCI Fund Management Limited (“TCI”), through entities it manages, has been a shareholder of Canadian National since 2018 and currently owns over 36 million shares of the company, representing more than 5% of the shares outstanding, valued at $4bn.

In light of the Surface Transportation Board (the “STB”) ruling today, we think it is imperative that Canadian National immediately withdraws from its agreement to buy Kansas City Southern (“KCS”).

The opinion of the STB is clear: it does not want Canadian National to buy KCS, so persisting in the face of explicit opposition from the STB would be hugely damaging to the reputation of CN and potentially financially disastrous because it would expose the company to the risk of forced divestment and damaging remedies.

The Board has a choice. It can withdraw from the merger agreement, appeal the ruling or try to proceed without a voting trust.

An appeal cannot be won, and it is not an appeal you would want to win, so do not embark on what would be an expensive and undignified charade. Continuing with the bid would not only be futile but, knowing it will ultimately end in failure, would also be unprofessional and disrespectful to everyone involved in the process. Instead, the company should withdraw and save billions of dollars in break fees.

Proceeding without a voting trust would be reckless, irresponsible and massively value destructive. The Board must understand that the rules have changed. The old rules do not apply to this transaction. There is no way you can have any confidence in how the new merger rules will be interpreted because they have never been used before. Therefore, given there is such uncertainty around the approval process, it would be negligent to make a higher offer for KCS. It would also demand billions more in advisory and break fees.

 

 

Not only is the STB against the deal but the United States Department of Justice, the Federal Trade Commission and US political leaders have all stated their opposition to large-scale M&A, so needlessly antagonising these agencies would be harmful to the long-term interests of both CN and the rest of the North American railroad industry. It is time to do the right thing, accept the deal cannot be done, and withdraw from the transaction.

Since 2016, CN’s financial results have lagged significantly behind those of the other railroads. The company has underperformed on nearly every measure of productivity and efficiency. Revenues per RTM, expenses per RTM, return on capital, operating ratio and profits have all gone backwards compared to the rest of the industry*. CN has lost its way and the business needs to be fixed as a matter of urgency. That is the top priority. There should be no other objective and no distractions. The Board should not allow another wasteful dollar to be spent on the bid nor another minute of executive time.

The most pressing need is not a misguided pursuit of an unattainable prize but the establishment of a culture of operational excellence that so clearly exists at other railroads such as Canadian Pacific and CSX.

We stated in our previous letter, dated 18 May 2021, that if the STB rejected CN’s voting trust, we would expect the immediate resignation of Chairman Pace and the CEO, Jean-Jacques Ruest. We stand by that statement.

From the start, it has been clear and obvious the bid would fail. That the Board sanctioned the bid, together with potential fees of C$2bn, is an egregious failure of oversight and there must be accountability. CN needs a change of senior management and a shake-up of the Board. That process should begin today.

There is one person who we think is the prime candidate for the job as Canadian National’s CEO, Jim Vena. He has a proven track record as an exceptional operator, he is available and has our full support. Mr. Vena’s time at CN and Union Pacific demonstrate that he knows how to run a railroad successfully and make no mistake, it is a railroader that CN needs.

In addition to a change in executive leadership, more railroad experience and expertise is required on the Board, so we think Gilbert H. Lamphere should be appointed as a director. Mr. Lamphere is one of the most experienced railroad executives in North America, having previously served as Chairman of the Illinois Central Railroad and as a member of the boards of CN (1998-2005) and CSX (2008-2015). He was also one of the original proponents of PSR. Gil Lamphere is independent and would be an outstanding addition to the Board.

 

 

In conclusion, CN owns a unique asset—the best rail network in North America—so it does not need to acquire KCS to prosper. CN should also be the most efficient and fastest growing railroad in the industry, but change is needed to achieve this goal. History has shown that with the right leadership railroads can be fixed quickly. CN should be no different.

TCI is a long-term shareholder and we want what is best for Canadian National. We believe the majority of other CN shareholders share our vision and would support the actions and leadership changes we are recommending.

Yours sincerely,

 

/s/ Chris Hohn		/s/ Ben Walker
Chris Hohn		Ben Walker

 

* See the attached presentation for an analysis of CN’s recent performance. Do not waste any time adjusting the data or making excuses. Instead, acknowledge the issues and accept that significant improvements are required for CN to achieve its full potential.

 

 

Other disclosures: TCI, through entities it manages, owns over 55 million shares of Canadian Pacific, representing more than 8% of the shares outstanding, valued at $4bn. TCI has no ownership position in Kansas City Southern.

 

 

 

Exhibit 3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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