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Bloomberg
Kansas City Southern agreed to a $30 billion merger with Canadian National Railway Co, scrapping a $25 billion deal with Canadian Pacific Railway Ltd. after it declined to boost its offer.
Under the deal, Canadian National will pay $200 and 1.129 shares of its stock for each share of Kansas City Southern, the US railroad said. Kansas City Southern paid a $700 million breakup fee to Canadian Pacific, which will be reimbursed by Canadian National.
Kansas City Southern last week deemed Canadian National’s bid superior and gave Canadian Pacific until the end of this week to sweeten its offer. Instead, Canadian Pacific said it wouldn’t enter a bidding war. It urged Kansas City Southern to drop its larger rival’s proposal because of heightened risk that the deal couldn’t win approval from US regulators, which is still a looming question mark for Canadian National.
The ultimate outcome will determine which gets to be the first railroad to operate from Canada, down through the US and on to Mexico. Kansas City Southern gets about half its revenue from Mexico, which is poised to capture investment as manufacturers seek to use a renegotiated trilateral trade agreement to shorten overseas supply lines.