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Opinion
Brooke Sutherland

Forget Bitcoin. Railroads Are the New Bubble.

A takeover of Kansas City Southern presents a singular opportunity. But at $33.7 billion and counting, the bidding war for this prize is entering dizzying territory.

Kansas City Southern stands to be a prime beneficiary of any North American manufacturing revival.

Kansas City Southern stands to be a prime beneficiary of any North American manufacturing revival.

Photographer: Luis Antonio Rojas/Bloomberg

In this year of financial kookiness around SPACs, Bitcoin and non-fungible tokens, the hottest M&A target is an old-school U.S. railroad that traces its roots to the 1800s. And it’s now at the center of a bidding war. 

Kansas City Southern rebuffed multiple offers from private equity firms last year before agreeing in March to sell itself to Canadian Pacific Ltd. On Tuesday, rival Canadian National Railway Co. lobbed in an offer of its own. Its $325-a-share stock and cash bid for Kansas City Southern values the railroad at $33.7 billion including the assumption of debt. The proposal is a roughly 20% premium to the implied $275-a-share value of Canadian Pacific’s bid upon its announcement and more than 50% higher than what Blackstone Group Inc. and Global Infrastructure Partners reportedly offered for Kansas City Southern only in September.