Kansas City Southern (NYSE:KSU) says it is terminating its merger agreement with Canadian Pacific Rai(TSX:CP) after determining that Canadian National Railway's (TSX:CNR) revised bid of $33.6-billion U.S. is a superior offer.
Under terms of the agreement, Montreal-based Canadian National Railway will pay $200 U.S. cash and 1.129 shares of CN stock for each of Kansas City Southern's 90.9 million shares and assume $3.8 billion U.S. of Kansas City debt.
Canadian National’s offer represents a 45% premium over Kansas City Southern's closing stock price on March 19. Kansas City shareholders are expected to own 12.6% of the combined company.
The U.S. railway said it has notified Canadian Pacific Railway that it intends to terminate its agreement after determining that CN's revised proposal constitutes a "superior proposal." Kansas City will pay a $700-million U.S. break fee to Calgary-based Canadian Pacific.
Canadian Pacific Railway now has the right to amend its offer, with the Kansas City board determining if any new proposal is worth considering. However, Canadian Pacific Railway Chief Executive Officer Keith Creel said two weeks ago that his company had no plan to increase its offer because he believed its more likely to be approved by regulators.
Either transaction would connect ports and railways in the United States, Mexico and Canada for the very first time.
