Kansas City Southern Turns Down Canadian Pacific MergerBy Lorenzo Núñez | Mon, 08/16/2021 - 09:41
Kansas City Southern (KCS) announced that after a careful and thorough review in consultation with outside financial and legal advisors, the company has determined that the unsolicited proposal received from Canadian Pacific Railway Limited (CP) on August 10, 2021 to acquire KCS in a cash and stock transaction does not constitute a “Company Superior Proposal” and could not reasonably be expected to lead to a “Company Superior Proposal,” as defined in KCS’ previously announced definitive merger agreement with Canadian National (CN).
As previously reported by MBN, Canadian Pacific Railway Limited submitted a “superior” proposal to acquire Kansas City Southern (KCS) in a stock and cash transaction valued at approximately US$31 billion, offering KCS stockholders an alternative that recognized the premium value of KCS while providing more regulatory certainty. This proposal represents improved terms to those agreed to in the Canadian Pacific – Kansas City Southern merger agreement entered on March 21, 2021, which was then replaced with Canadian National’s proposal. In response, Canadian Pacific’s most recent proposal was substantially similar to those in the Canadian National (CN) merger agreement but offered significantly higher regulatory certainty than the proposed CN merger and significantly higher value than CP’s previously agreed combination. However, KCS considered CP’s “superior” proposal as unreasonable.
In the company’s press release, the KCS Board reaffirms its recommendation to KCS shareholders to vote in favor of the pro-competitive, end-to-end merger with CN, which will create the premier railway for the 21st century and offers unparalleled opportunities and benefits for customers, employees, shareholders, the environment and the North American economy.
As previously announced on May 21, 2021, KCS and CN entered into a definitive merger agreement, unanimously approved by the Board of Directors of each company, pursuant to which CN agreed to acquire KCS in a stock and cash transaction valued at US$325 per common share, based on CN’s May 13, 2021 offer, implying a total enterprise value of US$33.6 billion, including the assumption of approximately US$3.8 billion of KCS debt. Under the terms of the agreement with CN, KCS shareholders will receive US$200 in cash and 1.129 shares of CN common stock for each KCS common share.