After last month's big news of Canadian Pacific's ~$25B acquisition of Kansas City Southern, a spanner has been thrown into the works as competitor Canadian National has come in with a better bid. Canadian National came out with the details of the offer today, which include $200 cash and 1.059 $CNI shares for each $KSU share, valuing $KSU at just about $325 as of market open. (This compares to CP's previous offer of $90 and .489 CP shares or about $275 for each $KSU share at time of offer.)
This new bid sets up a big potential struggle for the last major railroad outside the big 6. KCS would have to pay a $700M breakup fee to CP in order to accept another deal, but the offer from CN is significantly better. Both deals would still be subject to STB approval, which is uncertain, and CN may have an even harder time getting approval given some overlap with the existing KCS network.
Canadian Pacific has already fired back in a statement:
“CN’s proposal is massively complex and likely to fail,” CP said, guns blazing in a press release issued late on April 20. “[It] would create the third-largest Class I railroad [after UP and BNSF] and destabilize the competitive balance in the North American rail industry. The only combination involving KCS that is clearly in the public interest is the one that Canadian Pacific has proposed, which has already garnered support from more than 400 shippers and other stakeholders. While remaining the smallest of the six U.S. Class I railroads by revenue, a combination [of] CP and KCS creates stronger single-line competition against existing Class I routes.
KCS shareholders are likely feeling like the belle of the ball with multiple bidders now in the mix and the lurking potential of a bid from Union Pacific or even Berkshire Hathaway (BNSF). At minimum CP would likely have to improve their offer in order to see it accepted. $KSU was up 15% to $295.50 at the end of today's trading.
Submitted April 20, 2021 at 07:03PM by TheHiveMindSpeaketh https://ift.tt/3tDq32L
