Kansas City Southern chooses the offer of C $ 31 billion for the railroad

Kansas City Southern has decided that a $ 31 billion Canadian Pacific bid is the better of the two bids on the table to buy the railroad.

The Kansas City, Missouri company said Sunday in a statement that it notified rival Canadian National bidder that it intended to end a merger deal and make a deal with Pacific Canada.

But it is not yet final. Canadian National still has five business days to negotiate amendments to its bid, and the southern Kansas City board could determine that a revised CN bid is better.

In its own statement, Canadian National said it is evaluating its options. “The CN will make carefully considered decisions in the interest of all CN shareholders and stakeholders and in line with our strategic priorities,” the railroad said.

According to the Canadian Pacific offering, each share of South Kansas City common stock would be exchanged for 2,884 CP shares and $ 90 in cash.

“We are pleased to have achieved this important milestone and to once again pursue this unique partnership in life,” said Keith Creel, President and CEO of Canada Pacific.

Canadian National’s bid was $ 33.6 billion, but regulators rejected a key portion of the bid last month.

The surface transportation board said Canadian National will not be able to use a voting trust to acquire Kansas City Southern and then maintain the railroad during the board’s lengthy review of the agreement.

Instead, regulators have already approved the use of a voting trust for Pacific Canada because there are fewer competitive concerns about the combination of Pacific Canada and southern Kansas City.

Pacific Canada set a deadline for Sunday for its bid. Both Canadian offerings include a combination of cash and stock and the assumption of about $ 3.8 billion in debt in southern Kansas City.

It is still unclear whether Canadian National has any appetite to increase its offering because it faces pressure from a major shareholder to abandon the deal. London-based investment firm TCI Fund, which owns about 5% of CN’s shares, argues that CN should review its board of directors, get a new CEO and refocus its efforts. to improve their own operations.

For more than two decades, the railroad industry has been stable, with two railroads in the western United States – BNSF and Union Pacific – two in the eastern United States – CSX and Norfolk Southern – Kansas City Southern in the Midwest and the two Canadian railroads serving part of the United States. Regulators have said any merger involving two of the larger railways generally needs to improve competition and serve the public interest to get approval.