Kansas City Southern has decided that a $31 billion bid from Canadian Pacific is the best of two offers on the table to buy the railroad, throwing another obstacle into the possibility of a passenger rail between Baton Rouge and New Orleans.
The company said in a statement Sunday that it has notified rival bidder Canadian National that it intends to terminate a merger agreement and make a deal with Canadian Pacific. However, The Associated Press reports Canadian National still has five business days to negotiate amendments to its offer, and the Kansas City Southern board could determine that a revised CN offer is better.
In its own statement, Canadian National says it’s evaluating its options. Under the selected Canadian Pacific offer, each share of Kansas City Southern common stock would be exchanged for 2.884 CP shares and $90 in cash.
Canadian National’s bid was $33.6 billion, but regulators rejected a key part of the offer last month. The Surface Transportation Board said Canadian National won’t be able to use a voting trust to acquire Kansas City Southern and then hold the railroad during the board’s lengthy review of the overall deal.
In contrast, regulators have already approved Canadian Pacific’s use of a voting trust because there are fewer competitive concerns about combining Canadian Pacific and Kansas City Southern.
Which is where Louisiana’s passenger rail opportunity had come in. CN had planned to address the competition concerns cited against its offer via its operating plan and by selling 70 miles of track between New Orleans and Baton Rouge where KCS’ network directly overlaps with CN’s tracks. Louisiana advocates of passenger rail between the state’s two largest cities said earlier this year the deal is significant because it opens the doors to numerous possibilities. However, unless CN submits an amended offer to Kansas City Southern the possible sale is off. Read more about the deal.