Canadian Pacific Kansas City

CP, KCS Rekindle Relationship (UPDATED)

Surprise, surprise: On Sept. 4, 2021, four days after the Surface Transportation Board slammed the door shut on the CN-Kansas City Southern voting trust, effectively killing the proposed merger of the two Class I’s, the KCS Board of Directors has unanimously determined, after consultation with outside legal and financial advisors, that the “unsolicited proposal” received from Canadian Pacific on Aug. 31, 2021 to acquire KCS in a cash and stock transaction valued by CP at $300 per KCS share “could reasonably be expected to lead to a ‘Company Superior Proposal’ as defined in KCS’s merger agreement with CN.”

KCS + CN or CP: Timeout Called

Yet another potentially game-changing moment for Kansas City Southern in the railroad version of the Super Bowl—the merger tug-of-war between rival Canadian teams, taking place on the Surface Transportation Board playing field before head official Marty Oberman, this one not entirely unexpected: The KCS board has called a timeout (postponed) the Aug. 19 shareholder vote on accepting or rejecting CN’s power-play* offer until the STB rules on the CN/KCS voting trust. Will Canadian Pacific pull off a hat trick?*

CN Counters CPKC with a ‘Superior Proposal’ (UPDATED)

Perhaps not so surprisingly, almost exactly one month to the day after Canadian Pacific and Kansas City Southern announced their intent to merge into CPKC (Canadian Pacific Kansas City), CN made a counter-offer it said is a “superior proposal” that “will result in a safer, faster, cleaner and stronger railway.” CN’s proposal of $325 per KCS share “represents a 21% premium over the implied value of the CP transaction and values KCS at an enterprise value of $33.7 billion.”

CPKC: Tri-National Considerations

After a thorough review of my mergers and acquisitions career work, I have reached the conclusion that the Canadian Pacific-Kansas City Southern (“CPKC”) combination has several less-than-optimal locations where overall system performance affecting three nations—the U.S., Mexico and Canada—could be addressed and improved during Surface Transportation Board review.

CP-KCS Merger: Let the Games Begin

Several shipper trade associations, a major agricultural shipper and four of the remaining five North American Class I railroads have asked the Surface Transportation Board to review Canadian Pacific’s proposed acquisition of Kansas City Southern under the more stringent 2001 merger rules. A few argue that the smallest Class I rail carrier, KCS, should not get a “gentle pass” STB review. As to the merger itself, most support it, with a few notable exceptions.