Kansas City, Mo. – Kansas City Southern has decided that a $31 billion bid from Canadian Pacific to buy the railroad is the best of two proposals on the table.
The Kansas City, Missouri, company said in a statement Sunday that it has informed rival bidder Canadian National that it intends to conclude a merger agreement and a deal with Canadian Pacific.
But it’s not final yet. Canadian National still has five business days to negotiate an amendment to its proposal, and the Kansas City Southern Board can determine that a revised CN proposal is preferable.
In its own statement, Canadian National said it was evaluating its options. “CN will make carefully considered decisions in the interests of all CN shareholders and stakeholders and in line with our strategic priorities,” Rails said.
Under the Canadian Pacific Offering, each share of Kansas City Southern Common Stock will be exchanged for 2.884 CP shares and $90 in cash.
Keith Creel, President and CEO of Canadian Pacific, said, “We are delighted to reach this important milestone and to renew this life-long partnership.”
Canadian Pacific, based in Alberta, has its US headquarters in Minneapolis and substantial operations in St. Paul. The company has said that it plans to move those headquarters to Kansas City, Mo., if it merges with Kansas City Southern.
Canadian National’s bid was worth $33.6 billion, but regulators rejected a significant portion of the offer last month.
The Surface Transportation Board said Canadian National would not be able to use a voting trust to acquire Kansas City Southern and then hold the railroad during the board’s lengthy review of the overall deal.
Conversely, regulators have already approved the use of Canadian Pacific’s voting trust because of less competing concerns about the combination of Canadian Pacific and Kansas City Southern.
Canadian Pacific set a deadline for its proposal on Sunday. Both Canadian bids include a mix of cash and stock and an assumption of approximately $3.8 billion in Kansas City Southern debt.
It is not yet clear whether Canadian National has any appetite to increase its bid as it faces pressure from a major shareholder to drop the deal. London-based investment firm TCI Fund – which owns about 5% of CN’s stock – says CN should overhaul its board, get a new CEO and refocus efforts to improve its own operations. Should give.
The railroad industry has been stable for more than two decades, with two railroads in the western United States – the BNSF and Union Pacific – two in the eastern United States – CSX and Norfolk Southern – Kansas City Southern in the Midwest and two Canadian railroads. Serving part of the United States. Regulators have said that any merger involving the two largest railroads generally needs to be approved to increase competition and serve the public interest.