For the upcoming KSU Annual Meeting (May 3, 2012) shareholders are being asked to vote on the usual -- selection of auditors, executive compensation --and "housekeeping" issues.
Notable are Proposals 3A, 3B, 3C.
On page 69 Proposal 3A states:
"Paragraph Fourteenth of the Restated Certificate of Incorporation provides that the affirmative vote of the holders of 70% of all classes of stock that are entitled to vote in the election of directors is necessary in connection with certain business combination transactions with a greater than 5% stockholder. If the proposed Amended and Restated Certificate of Incorporation is approved, this provision would be eliminated and the provisions of the DGCL would govern with respect to the approval of such transactions. If the proposed Amended and Restated Certificate of Incorporation is approved by the Company’s stockholders, under the DGCL, future changes to the Amended and Restated Certificate of Incorporation would require the approval of a majority of the outstanding shares of stock entitled to vote thereon, except as described above with respect to changes that alter the powers, preferences or rights of the holders of preferred stock."
This change could be critical. It enables management to cultivate a "cosy" relationship with a large shareholder without having it reviewed or accepted by the common shareholders.
For example, CP Rail is currently fending off an agitating shareholder (Pershing). CP, as part of its defense, could purchase a significant ownership position in KSU (the KSU poison pill now having lapsed) and then cultivate a strategic alignment with KSU which could effectively thwart Pershing.
If, I am reading the documents correctly, under the prevailing KSU bylaws, the shareholders would have to approve such a transaction. Not so under the new Proposals.
Under Proposal 3A,B,C KSU managment is given great flexibility and no oversight requirements in cultivating new "alignments". Similarly, the removal of cumulative voting prevents a discident group of shareholders from focusing all of their available votes for a single director (i.e. this year there are 3 BOD positions up for election -- so each share is entitled to 3 votes) thereby, maximizing and focusing their available votes (3) on a single candidate.
Yes, CP shareholders would really be all for that:
'We aren't very good, and we really won't ever be (stupid mountains!). But those guys down there...no, there. Further....keep going.....yeah, them! They might even find our Canadian "screw the shareholders" attitude kinda novel.
Oh, and if we could all dispense with the time consuming due diligence mumbo jumbo, that would REALLY help us out....'
CP and KCS already do a lot of business together. They jointly own the Knoche Rail yard in Kansas City. The IC&E (bought by CP) sources dedicated unit trains of grain which they hand off at KC for the KCS to deliver to Mexico.
On April 10, 2012 the first unit train of North Dakota crude oil was handed off by CP to the KCS at Kansas City for delivery to the refineries at Port Arthur, Texas.
However, my allusion to CP was only one example. The 15 year Strategic Alliance between CN & KCS expires next year.
NS & KCS have jointly operate the Meridian Speedway and NS and KCS have just initiated dedicated intermodal service (53 ') between eastern US and Mexico.
The removal of the 5% ownership limitation between KCS and a third party allows the possibility of a "creeping takeover" by another railroad.
Creeping takeovers inflate the share price for the patient shareholders that hold onto their shares.