Reuters — U.S. railway operator Kansas City Southern said Thursday it had accepted Canadian National Railway’s $33.6 billion acquisition offer, upending a $29 billion deal with its competitor Canadian Pacific Railway.
The development, first reported by Reuters, gives CP five business days to make a new offer for Kansas City Southern. Were CP to table a new offer, a bidding war could ensue.
CP had previously announced a deal to buy KCS on March 21, before CN said it had submitted a higher bid on April 20. The headline price in CN’s cash-and-stock bid remains $325 per share as originally announced, though the company offered more of its shares to compensate for a decline in its stock price (all figures US$).
CN has offered to cover the $700 million break-up fee KCS will owe CP. It will also pay KCS $1 billion if the U.S. Surface Transportation Board (STB) rejects a voting trust structure it has put forward to complete the deal.
“We believe that Canadian Pacific’s negotiated agreement with Kansas City is the only true end-to-end Class I combination that is in the best interests of North American shippers and communities,” a CP spokeswoman said.
CP and larger rival CN are in a race to take over the U.S. railroad operator, which either way would create a North American railway spanning the U.S., Mexico and Canada, as supply chains recover from COVID-19 pandemic-led disruptions.
The acquisition interest in KCS also follows the ratification of the Canada-U.S.-Mexico Agreement last year that removed the threat of trade tensions, which had escalated under former U.S. President Donald Trump.
The STB last week approved the voting trust for CP’s proposed acquisition. CN has offered an identical arrangement.
— Reporting for Reuters by Greg Roumeliotis and Sanjana Shivdas.