Canadian National provides $ 30 billion for Kansas City Southern

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Actions of Kansas City Southern (KSU) rose nearly 15 percent on Tuesday in the news. Canadian national (CNI) decreased by more than 7%, while Canadian Pacific increased by about 1%.
Pacific Canadian (CP) and Kansas City Southern agreed to merge last month, a deal that would create a transportation giant that spans all of North America, from Canada to Mexico.

Kansas City Southern and Canadian Pacific were not immediately available for comment on Canadian national offer news.

During a earnings call by Kansas City Southern with analysts last Friday, CEO Patrick Ottensmeyer said the combination of the two railroads will create new service lines between Mexico and industrial hubs in Chicago, Detroit, Toronto and Minneapolis.

Ottensmeyer added that the merger has the support of many shippers, noting that the combination of the two railways would “increase rail options” and that “there is no single market or single customer to experience a reduction in the rail options they have today.” ”

But it can be difficult for Kansas City Southern to give up the Canadian National – unless Canadian Pacific returns with a bigger offer.

The Canadian national bid values ​​Kansas City Southern at $ 325 per share – 27% higher than if the stock closed on Monday and 45% above its closing price before the Canadian Pacific agreement was announced in March.

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Railroad assets in Mexico’s Kansas City Southern have long made it a desirable target.

There has been talk for decades about whether one of the two Canadian railroads or the American railroad giants Union Pacific (UNP), Norfolk Southern (NSC), CSX (CSX) or Burlington Northern Santa Fe, which is owned by Warrren Buffett’s Berkshire Hathaway (BRKB), could try to purchase Kansas City Southern.

Canadian national CEO JJ Ruest said in a press release that a merger with Kansas City Southern would “seamlessly connect more customers to US, Mexico and Canada nodes and rail ports.”

“With safer service and better fuel efficiency on Mexico’s key routes through Central America, the result will be a safer, faster, cleaner and more powerful railroad,” Ruest said.

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