Canadian Pacific has upped its offer for Kansas City Southern to approximately $31 billion, potentially reigniting a bidding war with rival railroad Canadian National.
Kansas City Southern is the smallest of the remaining major U.S. railroads, but it also controls critical cross-border routes with Mexico
Its size has long piqued the interest of other railroads as any bid could be the most likely to be approved by U.S. regulators long wary of signing off on railroad mergers out of antitrust concerns.
But its cross-border rails give Kansas City a high premium in the eyes of bigger railroads hungry to expand, particularly now as the U.S. economy emerges from a pandemic-induced recession.
Canadian National looked as though it would take ownership of Canadian National with a $33.6 billion takeover bid in May when Canadian Pacific refused to increase its own $25 billion bid. Canadian Pacific has urged shareholders of Kansas City Southern to reject the higher bid from Canadian National because, it says, it faces a tougher antitrust fight with regulators who will also consider the potential for increased rail congestion around Chicago
On Tuesday Canadian Pacific said its new proposal now has terms similar to those in Canadian National’s offer but that its bid provides “significantly higher regulatory certainty.”
Canadian Pacific said Tuesday that its cash-and-stock proposal includes 2.884 Canadian Pacific common shares and $90 in cash for each share of Kansas City Southern stock held. It also includes the assumption of $3.8 billion of outstanding Kansas City Southern debt. The bid values Kansas City Southern at $300 per share.