Filed by Canadian National Railway Company
Pursuant to Rule 425 under the Securities Act of 1933
Subject Company: Canadian National Railway Company
Commission File No. 333-94399
[CN in the Community][Safety and Environment]
[CN-IC Integration][CN-BNSF]
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Thinking of shipping ?
CN knows freight
Ship with CN
CN is the A different kind of railroad
most
improved Notes for remarks by Paul M. Tellier, President and
railroad Chief Executive Officer, Canadian National Railway
in North Company, at the National Grain and Feed
America. Association, San Diego, California, March 31, 2000.
Thank you for this opportunity to speak to the National
Grain and Feed Association. Many of the members here are CN
customers. Grain is very important to our franchise. I want
to take this opportunity to thank you for your business.
I'm very pleased to share the podium with Matt Rose,
President and Chief Operating Office of Burlington Northern
Santa Fe Railway to talk about the proposed combination
with BNSF. We're very proud of the transaction. We worked
very hard to get it right for stakeholders.
STB decision
In a few minutes, I will talk about why this transaction
will benefit shippers and receivers in the grain and feed
industry. But first, I want to talk about the Surface
Transportation Board's (STB) March 17 decision.
As you know, this decision follows four days of special
hearings. These hearings were called because the other
Class 1 railroads convinced the STB that it should look at
the implications our transaction had on their future and
the future of the industry.
I attended all four days of the hearings. I listened
carefully to all the participants. They included
legislators and public officials; labor unions and
shortline railroads; the financial community and
economists; shippers and all our major competitors.
One week after the close of the hearings, the STB ordered a
15-month moratorium on major rail consolidations, including
ours.
Was I surprised by that decision? Yes. And let me
tell you four reasons why.
No consensus
One, there was no consensus on the need for a moratorium.
In fact, there was significant opposition. Secretary of
Transportation Rodney Slater was opposed to a moratorium.
He said, "We do not believe a moratorium is the right
response." Ed Emmett, President of the National Industrial
Transportation League, was opposed to a moratorium. He
said, "The BNSF/CN combination could set the stage for a
new attitude toward customers among railroads."
Through written submissions, some 200 shippers put
themselves on the record in favor of a prompt and fair
hearing of the CN-BNSF combination. Spokespeople from every
category represented at the hearing - save one - opposed a
moratorium. The only group that unanimously endorsed the
moratorium was our competitors.
Bad public policy
Two, this moratorium is bad public policy. The STB has not
questioned the merits of our proposal. Rather, it claims
that the railroad industry is too "unstable" and that
shippers are suffering from problems created by the mergers
of other railroads.
These other railroads do not need, and certainly do not
deserve, the protection that the moratorium gives them.
Rather, they should have more competition. And that's what
our combination would provide.
No other sector is subject to this kind of regulatory
interference. You would not want the grain sector to have
such a moratorium imposed on your plans to restructure. No
sector should be asked to stand still while regulators make
themselves more comfortable with the changing scene. The
business world is changing too fast.
Harms rail customers
Three, the moratorium harms our customers. Rail shippers
constantly struggle to keep up with an increasingly
globalized market.
The combination would improve rail service for grain
shippers and receivers in ways I will explain shortly. Let
me add here, however, that we estimate that the public
benefits of the CN-BNSF transaction could exceed
half-a-billion dollars annually.
At best, these public benefits will be delayed for the
entire period of the moratorium. At worst, the benefits
will be lost forever, because delay may constitute denial
of the proposed transaction.
Unlawful
And four, we believe the moratorium is unlawful. It denies
our statutory right to a prompt and fair hearing. Congress
gave the STB the power to determine whether a proposed
consolidation is consistent with the public interest, but
required that it do so within strict time limits.
An STB time-out is not only illegal; it is unnecessary. The
STB can change its merger review rules, if need be, without
a moratorium, and while our application is under review. It
can do this and still protect the public interest.
Overturn the moratorium order
For these reasons, CN and BNSF are challenging the
moratorium in the courts. We believe we have strong legal
grounds and that we will be successful.
Others share this view. The Western Coal Traffic League,
for example, is also challenging this moratorium.
If we succeed, we would proceed to file our application
with the STB and receive a hearing on the merits of our
proposal. Our objective is to get a decision in 2001.
We believe that our actions will help promote good public
policy. I also believe it is the best interest of rail
shippers.
Illinois Central experience
Why am I so confident that our combination will be good for
our customers?
Many of you were in Santa Fe in 1998 when I spoke to the
National Grain Trade Council and the North American Export
Grain Association. The big topic then was the proposed
merger between CN and Illinois Central.
I can say right now what many of you who are our
customers already know: this merger has been an
outstanding success.
* It has created new destinations and origins.
* It has helped us use our assets more
effectively, making more cars available to
you.
* It has created backhaul opportunities.
* It opened new single-line routes to the Gulf
of Mexico.
* It enabled us to move through Chicago more efficiently
and quickly.
* It created longer hauls that made us more competitive
against trucks.
And it did all this without service disruptions. In fact,
on July 1, the date of the merger, our service has
continued to improve, and we haven't looked back since. Our
customer satisfaction index reflects this. We remain a
leader in safety. And our operating ratio became the best
in the rail industry - a clear indication that we are doing
things right.
The transaction
I see the combination with BNSF as very much along the same
lines as the merger with Illinois Central:
* The railroads join end to end with virtually no
overlap.
* The transaction combines two railroads that are
leaders in service.
* Both railroads are financially strong. In fact, CN has
completed a landmark year.
This combination will not affect either railroad's
financial position. It is a share exchange involving no new
debt. We will retain our financial strength.
The transaction combines two railroads that have already
demonstrated they can bring systems together with no
disruptions.
It brings more options to shippers. More market access
options, more routing options, and more port options: from
San Diego, Long Beach and Los Angeles on the Pacific
southwest to Halifax on the Atlantic; from Vancouver,
Prince Rupert, Seattle and Tacoma on the Pacific northwest
to Mobile and Houston on the Gulf of Mexico.
We will have an all-star management team, including BNSF's
Robert Krebs as chair, and myself as president and chief
executive officer.
When the combination is completed in 2001, grain and feed
customers will be served by a railroad that directly links
shippers and receivers in 33 states, eight provinces, and
multiple gateways to Mexico.
What CN brings to the table What does CN bring to the table
with this transaction, and why will grain customers
benefit?
* One of the newest locomotive fleets in the
industry;
* Best practices that include dedicated grain
shuttle train services;
* One of the industry's most efficient systems for
getting through Chicago.
To BNSF's existing grain customers, we will bring extended
single-line reach to both North American processors, and to
port facilities for overseas export:
* More efficient routing to the Port of Mobile;
* Trans-Atlantic shipment through Quebec City;
* Single-line access for wheat to flour mills in
Buffalo and Toronto;
* Single-line access for corn and soybeans to hog and
poultry producers in Western Canada.
American feedlots will benefit. In the West and the Pacific
Northwest, they will have single-line service from
producers on CN's network in Iowa. In the Western and
Central U.S., they will source oats, barley and canola from
Western Canada.
CN's grain customers will benefit too. They will reach New
Orleans through Centralia, Illinois, and avoid the
congested hub of Chicago.
The bottom line? Single-line access and efficient routing
to more North American markets will give grain shippers
more flexibility. In your business, windows of opportunity
open and close according to the vagaries of weather and
market conditions. When the export market is unattractive,
the combination provides alternatives in the domestic
marketplace, and vice versa.
No service disruptions
I understand the concerns that your organization raised
with the Surface Transportation Board. I appreciate your
desire to ensure that a rail combination helps improve
transportation options, and not make them worse. Many of
you have bitter experience of how a rail combination can
disrupt service, and you never want to go through that
experience again.
I am very confident our combination will not result in
service disruptions. Here are the reasons why.
First, CN and BNSF join together end-to-end. There is
virtually no overlap and no need for restructuring. We had
a similar perfect fit with our merger with Illinois
Central, and it went ahead flawlessly.
Second, both CN and BNSF already share the same basic
information technology platform - one we bought from Santa
Fe before it merged with Burlington Northern.
Third, there will be no major reorganization following the
combination. The people now in place will continue to
discharge their current functions.
The CN-BNSF guarantee
We are very confident that we can combine these railroads
without disruptions. We also recognize that it should be up
to the railroads - and not their customers - to assume any
of the risks involved. And that is why CN and BNSF have
made moves that are unprecedented in the rail industry.
First, we announced last month that if there are service
disruptions - and there will not be - we will make things
right for our customers. We are willing to provide written
guarantees to our shippers that service will be as good as
- or better than - the service they now have.
Second, we are offering a gateway guarantee. The routing
options you have available to you today as a shipper will
be physically and economically open to you tomorrow.
This combination is not about removing competition or
choice. It's about making sure that competition prevails.
It's about making sure that railroads are more competitive
for the benefit of their customers.
We are making further moves that are unprecedented in the
industry. Earlier this month, we announced that our
application to the STB would have a specific focus on
service levels. As part of our Operating Plan, we will not
only include the Safety Integration Plan required by the
regulator; we will also include a Service Integration Plan
to address how we will provide service equal or better than
the service we are now providing to shippers.
Moreover, as part of the STB's post-combination oversight
process, we will also include in our application a
dispute-resolution process for shippers who are less than
satisfied with our service.
Customer bill of rights
These guarantees and commitments demonstrate how far we are
willing to go to prove we're serious about our role as a
service industry.
In Santa Fe, I gave you my Customer Bill of Rights, built
around key values:
* customer focus;
* true partnership where we both understand each
other's requirements and constraints;
* accountability for service commitments;
* pricing that keeps you competitive and enables
us, the railroads, to earn our cost of
capital;
* performance standards, measurable in terms we
both agree on;
* innovative approaches to tapping new markets;
and
* service with no secrets, no surprises, and no
excuses.
This Customer Bill of Rights was my personal commitment -
my conviction. That conviction helps guide the vision of a
different kind of railroad - North American Railways, Inc.
A railroad that will set new standards for service. A
railroad that will lead the way for the future of the
industry.
We know that the railroad industry must change. CN has been
at the leading edge of making the kind of changes you told
us you wanted. This combination will keep us on the leading
edge to give you the service you need.
I hope I can count on your support for a combination that
is in the best interests of all of us.
Thank you.
Press Release
Investors are urged to read the joint proxy
statement/circular/prospectus related to the CN/BNSF
combination that was filed with the United States
Securities and Exchange Commission (SEC) on Form F-4,
together with any amendments to it, as it contains
important information. Investors can obtain this and any
other documents filed with the SEC without charge at the
Internet web site of the SEC (www.sec.gov). In addition,
any documents incorporated by CN by reference in the joint
proxy statement/circular/prospectus are available without
charge from CN, as described on page three of the joint
proxy statement/circular/prospectus.
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(C) 2000, Canadian National Railway Company
CN and North American Railways, Inc. have filed a registration statement on
Form F-4/S-4 with the United States Securities and Exchange Commission (SEC) in
connection with the securities to be issued in the combination. This filing
also includes the proxy statement for the shareholders' meeting to be held for
approval of the combination, investors should read this document and other
documents filed with the SEC by CN, BNSF and North American Railways, Inc.
about the combination because they contain important information. These
documents may be obtained for free at the SEC website, www.sec.gov, or the
website of the Canadian Securities Administrators www.sedar.com. Other filings
made by CN on forms 40-F and 6-K and CN's annual information form may be
obtained for free from the CN Corporate Secretary at 514.399.6569. Other
filings made by BNSF on forms 10-K, 10-Q and 8-K may be obtained for free from
the BNSF Corporate Secretary at 817.352.6856. For information concerning
participants in CN's solicitation of proxies for approval of the combination,
see "Certain Information Concerning Participants" filed by CN under Rule
14a-12. For information concerning participants in BNSF's solicitation of
proxies for approval of the combination, see "Certain Information Concerning
Participants" filed by BNSF on Schedule 14A under Rule 14a-12.
This document contains forward-looking statements regarding future events and
the future performance of CN, BNSF and the combined company that involve risks
and uncertainties that could cause actual results to differ materially. Those
risks and uncertainties include, but are not limited to, customer demand,
industry competition and regulatory developments, natural events such as severe
weather, floods and earthquakes, the effects of adverse economic conditions
affecting the Companies' shippers, changes in fuel prices and the ultimate
outcome of shipper claims, environmental investigations or proceedings and
other types of claims and litigations. We refer you to the documents that CN,
BNSF and the combined company file from time to time with the United States
Securities and Exchange Commission and the Canadian Securities Administrators,
such as a registration statement related to securities to be used in connection
with the proposed business combination, as well as the Companies' form 10-K,
form 40-F, form 10-Q, form 8-K and form 6-K, reports annual information forms
and material change reports, which contain additional important factors that
could cause their results to differ from their current expectations and the
forward-looking statements contained in this document.
