Reuters.- Canadian Pacific Railway Ltd. on Wednesday signed a $ 27.2 billion cash and stock agreement to buy Kansas City Southern, after Canadian National Railway Company admitted it could not recover its own $ 29.6 billion deal for the US rail company.
The merger will create the first direct railroad connecting Canada, the United States and Mexico, with a network covering some 32,000 kilometers and approximately $ 8.7 billion in annual revenues.
Canadian Pacific’s $ 300 per share cash and stock deal is superior to the $ 275 per share cash and stock deal he won in March to buy Kansas City Southern.
That deal was canceled when Canadian National traded with Kansas City Southern in May with a cash and stock offer of $ 325 per share.
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Kansas City Southern shares were little changed at $ 281.55 being traded today in New York.
Canadian National took a hit when the regulator US Surface Transportation Board (STB) last month rejected a temporary “voting confidence” structure that would have allowed Kansas City Southern shareholders to receive the scrutiny of the agreement without having to wait for full regulatory approval.
Canadian Pacific has obtained approval for its proposed voting trust from the STB, so Kansas City Southern shareholders will receive the $ 300 per share in cash and stock, even if the regulator rejects the deal.
The regulatory certainty it provided convinced the Kansas City Southern board of directors to move to a deal with Canadian Pacific, even though its bid was lower than that of Canadian National.
Canadian National had also come under pressure from some of its investors, including hedge fund TCI Management Ltd, to drop its offer to buy Kansas City Southern.
Shares of Canadian National are up 3.7% to C $ 150.97 as its investors expressed relief at the abandonment of the attempted transaction.
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