Reuters.- Canadian Pacific Railway Ltd signed a $ 27.2 billion cash-and-stock deal on Wednesday to buy Kansas City Southern, after Canadian National Railway Co admitted it couldn’t salvage its own $ 29.6 billion deal for the U.S. rail company. .
The merger will create the first direct railroad linking Canada, the United States and Mexico, with a network spanning some 32,000 kilometers and approximately 8.7 billion in annual revenue.
Canadian Pacific’s $ 300-per-share cash-and-share deal is higher than the $ 275-per-share cash-and-share deal it had won in March to buy Kansas City Southern.
That deal was canceled when Canadian National negotiated with Kansas City Southern in May with a cash and stock offer of $ 325 per share.
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Shares of Kansas City Southern are little changed at $ 281.55 in trading today in New York.
Canadian National took a hit when the regulator US Surface Transportation Board (STB) last month rejected a temporary “voting trust” structure, which would have allowed Kansas City Southern shareholders to receive consideration of the deal without having to wait. full regulatory approval.
Canadian Pacific has obtained approval of its proposed voting trust from the STB, so Kansas City Southern shareholders will receive the $ 300 per share in cash and stock, even if the regulator rejects the deal.
The regulatory certainty this provided convinced the Kansas City Southern board of directors to switch to a deal with Canadian Pacific, even though its offer was lower than Canadian National’s.
Canadian National had also faced pressure from some of its investors, including hedge fund TCI Management Ltd, to abandon its bid to buy Kansas City Southern.
Shares of Canadian National are up 3.7% to C $ 150.97 as its investors expressed relief at the abandonment of the deal attempt.
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