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The Kansas City Southern board will review a proposed bid of $ 33.7 billion of Canadian National, the latest twist in the battle for the U.S. rail operator that could result in the biggest merger of the year.
Kansas City Southern has already signed a merger agreement with Canadian rival Canadian Pacific, which offered $ 28.9 billion including debt to acquire the U.S. company last month, but will undertake a review of the rival offer for fiduciary obligation to shareholders to evaluate the largest offer, CN said Saturday.
Both transactions would create the first American railroad to cover Canada, the United States and Mexico and would be the continent’s largest transaction between rail operators since 1999.
“We are confident that CN is the best proposal, best partner, best railroad and best solution for KCS and the U.S. economy,” said Robert Pace, chairman of the board of Canadian National in a statement.
Calgary-based Canadian Pacific said the review of the Kansas City council’s rival bid “simply fulfills its obligations under the merger agreement with CP.” He added that “this encourages us [Kansas City Southern] we will carefully review the details of the CN’s offer as soon as possible, which we believe will lead them to question the true value and to deal with the certainty of their proposal ”.
Kansas City Southern did not immediately respond to a request for comment. A person close to the company previously told the Financial Times that the Canadian national offering could be subject to a more rigorous review by the U.S. regulator, the Surface Transportation Board.
It was not immediately known what the deadline for the bid review might be.
At $ 325 per share, including $ 200 in cash, the Montreal-based Canadian national bid represents a 21% premium to the Canadian Pacific bid, at $ 275 per share, including $ 90 in cash and the rest in stock.
Both Canadian companies operate in the central and eastern U.S., along with rivals CSX and Norfolk Southern. Kansas City Southern is the smallest of the seven U.S. Class 1 rail operators, but the only one with north-south operations with a network of routes spanning from Missouri to the two coasts of Mexico.
The last major rail deal came in the late 20th century, when CSX and Norfolk Southern jointly acquired Conrail.
Additional reports by James Fontanella-Khan and Ortenca Others
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