The bidding war to acquire rail operator Kansas City Southern (KCS) has been going on for six months but could end in September after the US company was left with only a bid it wasn’t looking for and a tight contract deadline to accept it.
With a rail network stretching from Kansas to southeastern Mexico, KCS has until September 12 to agree to the Canadian Pacific Railway (CP) merger proposal for $31 billion or the deal will be canceled , KCS.CP chief executive Keith Creel said at a conference. place on September 1.
The merger would create the first rail corridor between Canada, the United States and Mexico.
On Friday, KCS announced that it would hold an extraordinary general meeting on September 24 to vote on the merger proposals.
KCS already rejected an offer from CP when it decided to accept Canadian National’s (CN) $33.7 billion proposal in May. The original idea to acquire KCS came from CP and CN tried to close the deal with a higher offer.
US rail regulator STB unanimously rejected CN’s deal with KCS on Tuesday, saying the merger failed to meet its public interest standards.
While CN and KCS expected a positive regulatory outcome to complete the merger during the shareholder voting session, CP warned that the STB was likely to reject the deal due to competition concerns.
CP’s offer should always have been considered superior because it provides “certainty to the deal,” Creel said, noting that the deal already had regulatory approval.
Although there is a strong possibility that KCS will eventually accept CP’s proposal, the former said on Wednesday that he was working “with CN to assess the options available”. On the same day, it received the unsolicited proposal from CP, which reaffirmed its interest in acquiring KCS by offering identical conditions to those of the offer which had been rejected.
Of the seven Class 1 railroads in the United States, those owned by CP and KCS are the smallest and will remain so after the merger.
Together, their networks would provide a 32,187 km link between the three countries and potential annual revenues of nearly US$9 billion.