A $30 Billion Takeover Target Can Have Cake, Eat It Too
The bidding war for Kansas City Southern is heating up again. Shareholders’ best bet may be to stay cool.
Canadian Pacific has reentered the bidding war for railroad Kansas City Southern.
Photographer: Luke Sharrett/Bloomberg
Wanted: A crystal ball. Rush shipping to Kansas City Southern shareholders.
Canadian Pacific Railway Ltd. on Tuesday reentered the bidding war for the railroad, which is the smallest of the major North American rail operators and the only remaining opportunity for consolidation in an already tight-knit industry. Canadian Pacific boosted its offer to $300 a share in stock and cash, or about $31 billion including the assumption of debt. That’s still less than the implied current value of the deal Kansas City Southern agreed to with Canadian National Railway Co. in May. But Canadian Pacific CEO Keith Creel calls the extra dollars in Canadian National’s bid “fools’ gold” because the rival bidder faces a tougher path to regulatory approval. He’s betting Kansas City Southern shareholders will be willing to trade a higher price for more certainty that a deal will actually close. The trouble is, while it’s clear that Canadian National has to jump through more hoops to win regulators’ signoff and there are reasons to be skeptical, there’s still a chance it could pass muster.