Please ensure Javascript is enabled for purposes of website accessibility

Canadian National Launches Rival $33 Billion Bid for Kansas City Southern

By Lou Whiteman - Updated Apr 20, 2021 at 10:31AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The target already has a deal in place to be acquired by Canadian Pacific.

Canadian National Railway (CNI 0.11%) has launched a $33 billion bid for Kansas City Southern (KSU), trying to break up rival Canadian Pacific Railway's (CP -1.19%) agreement to acquire the U.S. railroad.

Canadian National (CN) is offering cash and stock worth $325 per share for Kansas City Southern, which is about $56 per share more than the initial Canadian Pacific (CP) offer. In a letter to the Kansas City Southern board, CN said it believes its deal would provide greater long-term stability than a CP/Kansas City Southern pairing.

A CN train coming around a bend.

Image source: Canadian National.

"Our proposal clearly provides superior value to the proposed transaction with CP, including greater value certainty for your shareholders given the significantly greater upfront cash consideration," Canadian National CEO Jean-Jacques Ruest wrote.

In March, CP announced plans to acquire Kansas City Southern for about $30 billion in cash and stock. The deal would end a 20-year drought in major railroad deals, and is likely to come under heavy regulatory scrutiny.

Canadian National, like CP, talked up the benefits of a merger that would combine Kansas City Southern's track down the spine of the U.S. and into Mexico with the Canadian railroad's coast-to-coast network.

"Customers of both companies will benefit from faster, more direct and more efficient service for North-South trade," Ruest wrote. "CN and KCS will have a robust network of end-to-end single-line services from Mexico to Canada, with an enhanced ability to connect ports in the Atlantic, Pacific and the Gulf of Mexico."

Canadian National offered to set up a trust similar to a plan arranged between CP and Kansas City Southern to try to alleviate some of the regulatory risk to KCS shareholders. But that structure has come under fire from regulators, and full approval will likely take more than a year in any railroad deal.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Kansas City Southern Stock Quote
Kansas City Southern
KSU
Canadian Pacific Railway Stock Quote
Canadian Pacific Railway
CP
$70.65 (-1.19%) $0.85
Canadian National Railway Company Stock Quote
Canadian National Railway Company
CNI
$113.31 (0.11%) $0.12

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
316%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/05/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.