Canadian Pacific Railway makes new bid for Kansas City Southern


CALGARY – Canadian Pacific Railway Ltd. is making a new takeover offer for Kansas City Southern that values the U.S. railway at US$31 billion.

The new bid comes ahead of a vote on Aug. 19 by Kansas City Southern shareholders on a rival offer by Canadian National Railway Co. valued at US$33.6 billion.

However, CP Rail said it believes its offer is more likely to be approved by U.S. regulators.

“At the time of CN’s offer in May, we chose to not make a revised offer because we believed that engaging in a bidding war with CN would have been value destructive to CP shareholders,” CP Rail CEO Keith Creel wrote in a letter to the KCS board.

“However, we believe that now is the right time for us to re-engage with KCS, as the regulatory uncertainty of the proposed CN merger has placed KCS stockholders in the unfortunate position of having to vote on the proposed CN merger and, as a consequence of approving such proposal, eliminate KCS’s ability to consider superior offers, all the while not having any level of certainty with respect to whether the STB will approve CN’s use of a voting trust.”

CP Rail has urged KCS shareholders to reject the CN deal because of the regulatory uncertainty of its rival’s offer.

CN is awaiting a decision by the U.S. Surface Transportation Board on the railway’s plan to set up a voting trust that would acquire KCS and hold the company during the regulator’s review of the overall deal.

The STB has already approved CP Rail’s use of a voting trust.

CP Rail had signed a deal in March to buy KCS for about US$275 per share, but CN topped that offer and secured support from the KCS board for its proposal in May.

Under CP Rail’s new offer, KCS shareholders would receive 2.884 CP Rail shares and US$90 in cash for each common share held, representing a value of about US$300 per share.

The CN proposal would see KCS shareholders receive US$200 in cash and 1.129 CN shares for each share in an offer valued at about US$325 per share.

Both deals include the assumption of about US$3.8 billion in Kansas City Southern’s debt.