CN Rail bids $33.7B for Kansas City Southern

A bidding war is breaking out for Kansas City Southern, with Canadian National Railway making a $33.7 billion cash-andstock offer for the railway.

The bid trumps a $25 billion cash-andstock proposal made by Canadian Pacific last month.

Any deal would capitalize on growing trade across North America by creating the first railroad that would link the United States, Mexico and Canada. Last year the three countries entered into a revamped regional trade pact, negotiated by President Donald Trump, that is expected to encourage trade and investment across North

America.

A surge in manufacturing is already benefiting the companies. According to a research report Monday from Stifel, the six major railroads all reported double-digit increases in volume over the past week compared with a year earlier when the coronavirus pandemic cut shipping volume sharply.

“These strong volumes, when coupled with other data points such as the ISM, should bode well for the economy,” analyst Benjamin Nolan wrote.

CN said its offer is worth $325 per Kansas City Southern share. Kansas City Southern shareholders would receive $200 in cash and 1.059 shares of CN common stock for each share. The transaction would include about $3.8 billion in Kansas City Southern debt.

If the companies were to combine, it would create a business connecting ports and rails in the United States, Mexico and Canada.

In contrast, Canadian Pacific said its proposed deal would create a combined company that would operate about 20,000 miles of railway, employ 20,000 people and generate annual revenue of about $8.7 billion.

Citi research analyst Christian Wetherbee said Canadian Pacific may respond with a higher bid, but he said whichever Canadian railroad misses out on acquiring Kansas City Southern could also end up trying to acquire another U.S. railroad.