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Canadian Pacific, Canadian National Clash Over Kansas City Southern

By Micah Maidenberg

 

Canadian Pacific Railway Ltd. cast doubt on Canadian National Railway Co.'s bid for Kansas City Southern in a letter, the latest salvo in an ongoing effort by both Canadian railroads to buy the latter company.

Canadian Pacific Chief Executive Keith Creel said in a letter to Kansas City Southern Chief Executive Pat Ottensmeyer dated April 23 and released today that there are competitive routes that would be extinguished if Canadian National and Kansas City Southern combined.

"I am sure I do not need to belabor the extent of the competitive overlaps" between the two companies, Mr. Creel said in the letter. Those flows, he said, from "broadly parallel" routes the two railways have between Springfield, Ill., and New Orleans

On Friday, Canadian National described its bid for Kansas City Southern as "procompetitive" and laid out its case for that position in a letter to the U.S. Surface Transportation Board, a federal regulator.

"As the board is well aware, the fiercest and most aggressive 'competitor' to the freight rail industry is the trucking industry, which has a dominant market share for the transportation of most commodities - including intermodal traffic," Canadian National said in the letter.

Both Canadian Pacific and Canadian National have mounted public-communications efforts where each is detailing their respective cases for purchasing Kansas City Southern.

Canadian National Railway said earlier this month it bid $33.7 billion in cash and stock to acquire Kansas City Southern, an offer it said values Kansas City Southern stock at $325 per share.

Last month, Canadian Pacific agreed to pay $275 a share, including $90 in cash, for Kansas City Southern, a bid valued at $25 billion.

On Saturday, Kansas City Southern's board said Canadian National's offer could reasonably be expected to lead to what is considered a superior offer as defined in its merger agreement with Canadian Pacific.

The company said it would start sharing nonpublic information and engage in discussions with Canadian National. Kansas City Southern remains bound by the terms of its deal with Canadian Pacific and its board hasn't determined that Canadian National's proposal does constitute a superior one.

In midday trading on Monday, Kansas City Southern shares dipped 0.08% to $301.54. Canadian National Railway stock increased 0.30% to $109.19. Canadian Pacific shares rose 0.14% to $371.23.

 

Write to Micah Maidenberg at micah.maidenberg@wsj.com

 

(END) Dow Jones Newswires

April 26, 2021 13:07 ET (17:07 GMT)

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