Canadian National Railway’s offer for Kansas City Southern Railway follows an earlier bid by Canadian Pacific Railway
Canada’s largest railway company has upped the ante in a high-stakes bid to acquire Missouri-based Kansas City Southern Railway.
Last week, Canadian National Railway announced that it had submitted an unsolicited rival bid to acquire KSC in a cash and stock deal valued at US$33.7 billion.
CN’s announcement comes about a month after CN’s main Canadian rival, Calgary-based Canadian Pacific Railway, made a similar offer to merge with KCS to form a new railway company known as CPKS.
The CP deal, worth $29 billion, valued KCS stock (NYSE:KSU) at $275 per share, the company said March 19.
CN said its deal will offer KSC common shareholders $325 per share.
“CN is confident that KCS will recognize the value of the CN proposal and will choose to partner with CN,” said CN legal counsel Raymond Atkins in a letter to the United States Surface Transportation Board.
Any merger or takeover involving KCS would require STB approval and would be subject to KCS shareholder approval.
CP has the option to sweeten its bid with a more lucrative counter-offer.
In his letter to the STB, Atkins called the CN bid “manifestly superior” and dismissed suggestions that CN’s acquisition of KSC would lead to a less competitive railroading environment.
“The fundamentally pro-competitive nature of the CN-KCS combination, which will give customers better service options, is further enhanced by CN’s commitment to address any competitive concerns…,” Atkins said.
In the past week, both CP and CN have issued statements implying significant customer and stakeholder support for their respective offers.
On April 23, CP issued a news release stating that 416 shippers and stakeholders have filed statements with the STB, expressing support for the CP-KCS merger.
CN issued a similar statement on April 26, announcing support from more than 400 stakeholders.
KCS meanwhile, says it is reviewing the rival bids with the help of financial advisers B of A Securities and Morgan Stanley & Co.
The KCS network includes 12 port locations in the southern United States and Mexico, including eight U.S. port facilities in the Gulf Coast states of Alabama, Mississippi, Louisiana and Texas, and four others in Mexico, including one Pacific Ocean port at Lazaro Cardenas, west of Mexico City.
KCS also owns a 50 percent interest in the Panama Canal Railway Company, which provides an ocean-to-ocean freight and passenger service along the Panama Canal.
More information about KCS can be found at www.kcsouthern.com.
KCS common stocks (NYSE:KSU), which were trading at around $200 US on Jan. 1, 2020, opened at more than $303 a share on April 26.