Canadian Nationwide Railway (CN Rail) seems to have come from behind and brought the lead within the race with Canadian Pacific Railway (CP Rail) to merge with Kansas City Southern to kind the primary rail freight community to hyperlink Canada, the U.S., and Mexico.
CN introduced Thursday that it has revised its offer to merge with Kansas City Southern (KCS), main the board of administrators for the Kansas City-based railway to deem CN’s proposal as superior to the merger agreement that KCS initially introduced with CP Rail.
CP and KCS introduced their $29 billion merger plan to create a railway spanning throughout Canada all the way down to the U.S. Gulf, and throughout Mexico to a number of port cities on March 21. CN then introduced an unsolicited offer that positioned a better worth on KCS on April 20.
Whereas CN’s newest offer stills values KCS at US$33.6 billion, CN introduced Thursday that it has supplied extra shares to KCS shareholders, who would personal a projected 12.6 per cent of the mixed firm. CN additionally stated it might reimburse KCS for the US$700 million break-up payment that KCS now owes for backing out of its agreement with CP.
“After consultation with the company’s outside legal and financial advisors, the KCS board of directors determined that CN’s revised proposal constitutes a ‘Company Superior Proposal’ as defined in KCS’s merger agreement with Canadian Pacific Railway Limited,” says an announcement from the KCS board of administrators, issued on Thursday.
CP now has 5 enterprise days to barter modifications to its original merger agreement that may persuade the KCS board to alter its thoughts about CN’s offer being superior.
“As we’ve said repeatedly, we are not going to enter into a bidding war,” stated CP Rail in an announcement late Thursday.
From a regulatory standpoint, many imagine CP’s offer would have a neater path to approval, as the CP and KCS rail networks meet in Kansas City, however don’t overlap anyplace. CN and KCS, in the meantime, each function within the New Orleans space. Farm teams in North Dakota have additionally advocated for the CP-KCS merger, saying it might introduce new competitors for rail of their state.
“It is not surprising that CN would raise its offer, and it only highlights CN’s recognition of the significant regulatory risk/challenges associated with its anti-competitive bid,” stated the assertion from CP. “There is nothing new here; this doesn’t make it any more likely that the CN proposal can close into a voting trust.”
KCS has till 5pm on Might 21 to formally settle for CN’s offer, which might nonetheless be topic to approval by KCS shareholders, the approval of a voting belief transition course of by the U.S. Floor Transportation Board, as effectively as different regulatory approvals.
Final week, CN introduced it had positioned an order for one thousand high-capacity grain hopper automobiles to be inbuilt Mexico by TrinityRail.