Canadian National is offering $ 30 billion for Kansas City Southern

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Shares of Kansas City South KSU rose nearly 15% on the news Tuesday. Canadian national CNI declined more than 7%, while Canadian Pacific was up about 1%.
Canadian Pacific CP and Kansas City Southern agreed to merge last month, a deal that would create a transportation giant that would span all of North America, from Canada to Mexico.

Kansas City Southern and Canadian Pacific were not immediately available to comment on the news of the Canadian national offer.

During the Kansas City Southern earnings call with analysts last Friday, CEO Patrick Ottensmeyer said the combination of the two railroads would create new service lines between Mexico and the industrial hubs of Chicago, Detroit, Toronto and Minneapolis.

Ottensmeyer added that the merger has the support of many shippers, noting that the combination of the two railways would “improve rail options” and that “there is no single market or customer experiencing a reduction in the rail options they offer. today. ”

But it can be difficult for Kansas City Southern to turn down Canadian National – unless Canadian Pacific comes back with a higher offer.

The Canadian national offer values ​​Kansas City Southern at $ 325 a share – 27% higher than where the stock closed Monday and 45% above the closing price before the Canadian Pacific deal was announced in March.

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Kansas City Southern’s railroad assets in Mexico have long made it a desirable takeover target.

There has been talk for decades about whether one of the two is Canadian railways or American rail giants Union Pacific UNP Southern Norfolk NSC CSX CSX or Burlington Northern Santa Fe, which is owned by Warrren Buffett’s Berkshire Hathaway BRKB, could try to acquire Kansas City Southern.

Canadian national CEO JJ Ruest said in a press release that a merger with Kansas City Southern “would connect more customers seamlessly with rail hubs and ports in the US, Mexico and Canada.”

“With safer service and lower fuel consumption on major routes from Mexico through the heart of America, the result will be a safer, faster, cleaner and stronger railroad,” said Ruest.

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