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KCS To Explore Deal With Canadian Pacific After Regulators Reject CN’s Plan

September 8, 2021 5:52AM CDT
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KCS To Explore Deal With Canadian Pacific After Regulators Reject CN’s Plan
In this Nov. 5, 2004 file photo, the logo of Kansas City Southern is down on a restored 1954 Kansas City Southern passenger locomotive at Union Station in Kansas City, Mo. Canadian Pacific is increasing its offer for Kansas City Southern to approximately $31 billion as it looks to best rival Canadian National for the railroad. Canadian Pacific said Tuesday, Aug. 10, 2021 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.(Norman Ng/The Kansas City Star via AP)

Last week’s decision by a federal regulator has Kansas City Southern switching tracks once again.

Following the derailment of Canadian National’s plan to acquire Kansas City Southern last week, the KCS Board of Directors announced Saturday that they would begin discussions with Canadian Pacific to craft what could become a “company superior proposal”. Canadian Pacific had proposed last month a new merger deal valuing Kansas City Southern at 31 billion dollars. Kansas City Southern’s board had determined it to be inferior to their merger agreement with CN.

Last week, the Surface Transportation Board unanimously ruled against Canadian National’s request to establish a voting trust to acquire KCS shares, effectively sidelining the Montréal firm’s 33-point-six billion dollar proposal. A special shareholders meeting to weigh in on the proposal scheduled for last Friday was pushed back to September 24th. KCS remains bound by the merger agreement with CN, and the board stresses that it has not changed its position on Canadian Pacific’s unsolicited proposal.

Calgary-based Canadian Pacific welcomed the decision. In a statement, CP said they looked forward to re-engaging with Kansas City Southern to craft what they call the only achievable combination of two Class One railroads. They have set a deadline of Sunday for KC Southern to accept their offer. Meanwhile, Canadian National says they continue to evaluate their available options.