Canadian Pacific made a new, higher offer on Tuesday, August 10, to buy Kansas City Southern worth about US$31 billion, including debt, reviving its takeover battle for the US freight railroad with arch-rival Canadian National, reported Reuters.
Canadian Pacific Chief Executive Keith Creel had refused to raise his previous US$25 billion for Kansas City Southern after losing to Canadian National in May, arguing that the transaction that Kansas City Southern had chosen to pursue was “not a real deal” because the Surface Transportation Board (STB), the US rail regulator, would shoot it down.
But with less than 10 days to go until Kansas City Southern shareholders are asked to vote on the deal with Canadian National on August 19, the STB has yet to rule on the proposed “voting trust” structure of that transaction. A voting trust insulates the acquisition target from the acquirer’s control until the STB clears the deal on a permanent basis.
Canadian Pacific had been hoping that the STB would have come out against Canadian National’s bid by now, according to people familiar with the matter. The STB did not respond to a request for comment on when it will deliver its ruling.
Another consideration behind Canadian Pacific’s u-turn was the opinion of influential proxy advisory firms, the sources said. Institutional Shareholder Services and Glass Lewis recommended that Kansas City shareholders vote in favor of the Canadian National but left the window open for them to revise their opinions if Canadian Pacific came in with a new bid.
“As Canadian Pacific went out telling (Kansas City Southern shareholders) to vote no, the feedback they got from investors was there was no other offer from you to help us make a decision,” said Cowen analyst Jason Seidl.
The acquisition of Kansas City Southern by either of its Canadian peers would create the first direct railway linking Canada, the United States and Mexico.
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