Kansas City Southern said on Sunday that it would accept the Canadian Pacific Railway’s $ 27.2 billion cash and stake acquisition offer as better than the $ 29.6 billion deal to sell to the Canadian National Railway.
The Canadian National Railway now has to submit better offers or lose transactions with Southern Kansas City until the end of Friday. At stake is the creation of the first direct rail link between Canada, the United States and Mexico.
Kansas City Southern’s change of heart is a temporary “voting trust” structure that allows the US Surface Transportation Board (STB) to receive $ 325 in cash and share consideration per share for Kansas City Southern shareholders last month. Happened after refusing. Deal with the Canadian National Railway without waiting for full regulatory approval.
The Canadian Pacific Railway has cleared the credibility of the proposed vote by the STB. Due to the regulatory certainty it provided, Kansas City Southern’s board of directors will switch to trading with the Canadian National Railway, even though the proposal was lower than the Canadian National’s, according to people familiar with the deliberations. I was convinced that.
There is a silver lining in the southern part of Kansas City. The Canadian Pacific Railway’s current offer is worth $ 300 per share in cash and shares, at $ 275 per share signed by the two companies in March before the Canadian National Railway gate crashed and signed. Better than cash and stock trading. Agreed with Kansas City Southern in May.
If the Canadian National loses to the Canadian Pacific, it will receive a $ 700 million installment fee from Kansas City Southern and will be refunded another $ 700 million paid to Kansas City Southern to give to the Canadian Pacific as a installment fee. We will close the transaction in March. Canadian Pacific says Kansas City Southern will cover this $ 1.4 billion incurred by the Canadian National Railway.
Canadian National is also under pressure from some investors, including hedge fund TCI Management Ltd, to abandon its pursuit of Kansas City Southern.
The Canadian National did not immediately respond to requests for comment on the next step.
The two railroads run parallel in the central United States last month, even though the overlap between the Canadian National Railway and Kansas City Southern networks was limited to 70 miles (113 km) between Baton Rouge and New Orleans. And if the voting trust for that transaction is approved, there will be less pressure on the competition. He added that he has not made a final decision as to whether the competitive issues faced by the transaction can be resolved under a complete regulatory review.
US President Joe Biden has issued a drastic executive order aimed at promoting competition in the US economy. An order prompted the STB to consider Amtrak’s statutory rights in assessing whether a rail merger would benefit the public.
Amtrak, a US government-owned passenger railroad, opposed the confidence of the Canadian public’s vote, saying its pledge to sell Baton Rouge to the New Orleans line would adversely affect Louisiana’s future passenger services.