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According to people familiar with the matter, Canadian Pacific will make a new and higher offer to acquire the Kansas City Southern Company worth about $31 billion, including debt, and restart its acquisition of US freight railroad with its main competitor, Canadian National Corporation. .
The CP board of directors has supported the plan to bid $300, which is higher than the previous bid of $275. KCS shareholders will be called to vote for or against the previous merger agreement with CN in less than two weeks.
CP has agreed to purchase KCS March, But when the target company’s board of directors approved it, CN defeated the deal with a cash and stock offer of $320 per share in May, Including debt, the company’s valuation is about 34 billion U.S. dollars.
However, CN’s stock price has since fallen by approximately 5%, reducing the overall value of the transaction.
Some KCS shareholders worry that the merger agreement with CN may be blocked by the US Ground Transportation Commission, which is responsible for overseeing transactions in the industry because the Montreal-based group is significantly larger than its Alberta rivals. The regulator stated in May that CN will face a “heavier burden” to show that its transactions are in the public interest.
Shareholder Services, the world’s largest agency advisory agency, stated that if the transaction is blocked by the regulator, KCS shareholders should vote for the transaction because they can still profit from CN’s termination fee. The termination fee will be worth $1 billion.
STB is expected to rule on the merger of KCS and CN this week, but people familiar with the matter said that the board of directors may wait until shareholders vote.
The British hedge fund TCI, which owns CP and CN shares, has been openly opposed to National’s pursuit of KCS due to regulatory obstacles.Funds run by billionaire investors Chris Horn It is the fifth largest shareholder of CN, holding 3% of the shares, and the largest investor of CP, holding 8.4% of the shares.
CN and CP have been fighting each other to secure KCS’s assets, because this would allow any freight rail group to connect its existing business from Canada to Mexico through the United States. Cross-border trade It is expected to rebound sharply.
CP, the first of two Canadian companies to reach an agreement with KCS, initially refused to increase the offer, even after CN began to bid for the company.
Although CP’s new bid will still be lower than CN’s proposed $320 per share, some shareholders may think this is a better option because it may face less regulatory scrutiny because it will merge the two smallest bids on the market. Participants.
The merger of KCS and CN will create the third largest rail operator in North America, and the merger with CP will make the duo form the smallest of the six companies.
CP has previously stated that CN’s larger offer indicates that if the company becomes the winning bidder, it will face regulatory challenges. At the same time, CN also removed advertisements and created a website called Connected Continent to win support for its bidding.
CP, CN and KCS declined to comment.