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The U.S. railroad operator Kansas City Southern Corporation said on Thursday that it has accepted a $33.6 billion takeover offer from the Canadian National Railway Corporation. Violation of a $29 billion transaction With its rival Canadian Pacific Railway Company.
Reuters first reported on this development, and it gave CP five working days to make a new offer to Kansas City South. If CP makes a new offer, it may trigger a bidding war.
CP previously announced the acquisition of Kansas City South on March 21, and CN said it had made a higher bid on April 20.
The total price of CN’s cash plus stock bid is still the originally announced $325 per share, although the company has offered more shares to compensate for the decline in its share price.
CN has proposed to pay the $700 million owed to CP in the South Kansas City breakup fee. If the U.S. Ground Transportation Commission rejects the proposed voting trust structure to complete the transaction, it will also pay $1 billion to southern Kansas City.
A CP spokesperson said: “We believe that the negotiation agreement between Canada Pacific and Kansas City is the only true end-to-end Class I combination that serves the best interests of North American shippers and the community.”
CP and larger rival CN are vying for competition from U.S. rail operators, which will create the first direct railroad connecting Canada, the United States and Mexico.
Any one of them acquiring southern Kansas City will create a North American railroad that spans the United States, Mexico, and Canada, as the supply chain has recovered from the COVID-19 disruption caused by the pandemic.
Following the ratification of the U.S.-Mexico-Canada Agreement last year, the agreement eliminated interest in acquisitions in southern Kansas City. The agreement eliminated the threat of escalating trade tensions in front of former U.S. President Donald Trump .
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