SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
July 20, 1994
Illinois Central Corporation
Exact name of Registrant as specified in its charter
Delaware 1-10720 13-3545405
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
455 N. Cityfront Plaza Drive, Chicago, Il. 60611-5504
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 755-7500
<PAGE>
Item 5. Other Events
Exhibit
28 Registrant's press release dated July 19, 1994.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant
has duly caused this report to be signed on its behalf by the
undersigned hereto
duly authorized.
ILLINOIS CENTRAL CORPORATION
/s/JOHN V. MULVANEY
John V. Mulvaney
Controller
Date: July 20, 1994
Exhibit 28
ILLINOIS CENTRAL AGREES IN PRINCIPLE TO ACQUIRE
KANSAS CITY SOUTHERN RAILWAY
Chicago, Illinois, and Kansas City, Missouri, (July 19, 1994)--
Illinois Central Corporation (NYSE: IC) and Kansas City Southern
Industries, Inc. (NYSE: KSU) jointly announced today that they
have signed a letter of intent providing for the acquisition by
Illinois Central Corporation of the Kansas City Southern Railway
and certain related assets. The Kansas City Southern Railway is
a subsidiary of Kansas City Southern Industries.
The acquisition will be accomplished by a merger of Illinois
Central Corporation and Kansas City Southern Industries, Inc.
immediately following the spin-off by Kansas City Southern
Industries to its shareholders of the stock of a subsidiary
holding its financial services businesses, which consist
principally of DST Systems, Inc. and the Janus Capital
Corporation. The acquisition, which is subject to receipt of a
favorable Internal Revenue Service ruling, the negotiation of
definitive documentation and a shareholder vote of both
companies, is expected to be completed in the first half of 1995.
Illinois Central Corporation will account for this transaction as
a purchase. Since the definitive agreements remain to be
negotiated, there can be no assurance that a transaction will
ultimately be consummated.
Kansas City Southern Industries' shareholders will receive, on a
tax-free basis, a distribution of approximately 21.2 million
share of Illinois Central Corporation common stock and stock of
a company which will hold shares of Kansas City Southern
Industries' non-rail operations. In addition, the letter of
intent anticipates that Illinois Central Corporation will assume
approximately $929 million of Kansas City Southern Industries'
indebtedness and provide $6 million to purchase its preferred
stock.
The combination of the Illinois Central Railroad and the Kansas
City Southern Railway will, under the common control of Illinois
Central Corporation, create an important rail network which will
serve 14 midwestern and southern states and link the geographical
markets of Chicago, New Orleans, Memphis, Kansas City, Port
Arthur, Dallas and Birmingham. The combined railroads will have
revenues in excess of $1 billion and a greatly expanded
geographic reach. Currently, the two railroads serve primarily
different geographic markets with no meaningful overlap in route
systems. Kansas City Southern Railway provides north/south
service between Kansas City and Beaumont/Port Arthur/Lake
Charles, while the Illinois Central Railroad serves the Chicago
to New Orleans corridor. The proposed transaction will create
more competitive alternatives for the two railroads' customers.
Kansas City Southern Railway's customers will gain improved
access to the northeast, and Illinois Central Railroad's
customers will enjoy improved access the west, southwest and
southeast. The combination will enhance the corridors of service
linking Chicago with Dallas and the southeast, enabling the
railroads to expand their service to the growing intermodal
markets. The railroads will have a balanced commodity base with
coal, chemicals, lumber/paper and grain, in addition to
intermodal.
To complete the acquisition, the Illinois Central Railroad will
be placed in trust pending Interstate Commerce Commission
approval of the common control of the two railroads. The
companies are confident that this transaction will be approved by
the Interstate Commerce Commission and expect the approval
process to be completed within a year from the submission of an
application.
At the closing of the transaction, E. Hunter Harrison, currently
the Illinois Central Railroad's President and Chief Executive
Officer, will become President and Chief Executive Officer of the
Kansas City Southern Railway, and Gerald Mohan will become
President and Chief Executive Officer of the Illinois Central
Railroad with John McPherson as Chief Operating Officer. Mr.
Mohan currently is Senior Vice President - Marketing of the
Illinois Central Railroad and has been affiliated with the
company for more than 34 years. Mr. McPherson is currently
Senior Vice President - Operations of the Illinois Central
Railroad. Gilbert H. Lamphere will retain his position as
Chairman of the Illinois Central Corporation, which will be the
parent company of both railroads upon completion of the
acquisition. Illinois Central expects that Kansas City Southern
Railway's employees and key management will continue to be
involved in the operation of that railroad.
Mr. Lamphere said, "This transaction presents a unique
opportunity to create additional value for the Illinois Central
and Kansas City Southern shareholders. We believe that by
combining a disciplined focus on efficient and low cost
operations, a broadened and balanced commodity base and a greatly
expanded service area, we will have substantial revenue growth
and increased profitability."
Mr. Harrison added, "This is an important addition to our twin
objectives of continued revenue growth and generating attractive
returns on invested capital. The acquisition of the Kansas City
Southern Railway extends the geographic reach of both railroads,
enhancing our position with our customers as the most efficient
and effective means of transportation." Harrison added the
following specific points supporting the rationale:
Kansas City Southern Railway has achieved annual compound
growth in carloadings during the last five years of
approximately 6% (excluding intermodal), a trend we believe
we can continue to build upon given Kansas City Southern
Railway's strong industrial base.
The initiation of a disciplined scheduled service will
dramatically improve our service offerings and permit
future revenue opportunities.
The configuration of our railroads will permit more direct
routings of customer traffic providing increased revenue
opportunities.
The Kansas City Southern Railway has spent almost $350
million in capital expenditures in the last three years.
This well-maintained plant will permit future capital
expenditures to be reduced.
Cost improvements can be achieved in a variety of areas,
including elimination of duplicative administrative
functions, consolidation of locomotive fleets, more
efficient use of yards and other operating efficiencies,
all designed to ensure that the railroads will remain among
the most profitable in the U.S.
Landon H. Rowland, President and Chief Executive Officer of
Kansas City Southern Industries, Inc., commented, "The
combination of the two railroads is a tremendous opportunity for
Kansas City Southern Industries' shareholders, employees and
customers. By adopting the best of both railroads, we can offer
greater financial strength for our shareholders, better service
for our customers and the improved opportunities for our
employees that come with growth. At the same time excellent
growth opportunities for our financial services operations will
be greatly enhanced. Both our transaction processing and asset
management businesses have excellent market positions with
exciting prospects for improved revenue and earnings. Our plans
are to pursue these opportunities vigorously."
Illinois Central is being advised by The Bridgeford Group and
Simpson Thacher & Bartlett. Kansas City Southern Industries'
advisors are CS First Boston Corporation; Watson, Ess, Marshall
& Enggas and Proskauer Rose Goetz & Mendelsohn.
Illinois Central Corporation is a holding company whose principal
subsidiary, Illinois Central Railroad, operates a 2,700-mile
freight railroad in six states between Chicago and the Gulf of
Mexico.
Kansas City Southern Industries, Inc. is a holding company, one
of whose principal subsidiaries, The Kansas City Southern
Railway, operates a 2,700-mile main line freight railroad in 11
states, principally between Kansas City and Port Arthur, Texas,
and between Dallas and Birmingham, Alabama and serves principal
ports in the Gulf of Mexico.
