Following the recent announcement by Canadian Pacific that it intended to merge with Kansas City Southern, pending approval from both companies boards and from the Surface Transportation Board (STB), Canadian National has made a rival bid.
In its bid, which CN calls ‘superior’, it is proposing to pay 325 USD per KCS share – 21 percent more than the implied value put forward by Canadian Pacific. Canadian National said it valued KCS at 33.7 billion USD.
Like the potential merger with Canadian Pacific, a merger with CN would result in a railroad that would link Canada, the US and Mexico.
“We firmly believe our proposal is far superior to KCS' existing agreement with CP because it offers superior financial value over the immediate and long-term, a more complementary strategic fit, greater choice and efficiencies for customers and enhanced benefits for employees and local communities. We look forward to engaging constructively with KCS' Board and all relevant stakeholders to deliver this superior transaction.”
Canadian National has written to the Board of Directors at Kansas City Southern, submitting its proposal. Canadian National has also submitted a letter to the Surface Transportation Board. Canadian National said that KCS and its shareholders were free to decide which of the two offers was preferable and CP was free to make a counter offer. It lamented CP’s decision to go down another route, filing a letter with the STB, in which it said a CN-KCS combination would be ‘illusory’, ‘inferior’ and ‘anticompetitive’. KCS did not participate in this filing.
Canadian Pacific said that its offer enhanced competition by creating a stronger competitor against Union Pacific, BNSF and CN.
CP’s swift filing with the STB demonstrates how serious it is about its merger efforts with KCS. It is up to KCS to determine which offer it finds preferable; however, an indication that one offer might be viewed more preferably by the STB would be valuable.
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