Kansas City Southern Scraps Deal With Canadian Pacific -- Update
May 21 2021 - 11:33AM
Dow Jones News
By Dave Sebastian
Kansas City Southern has terminated its combination agreement
with Canadian Pacific Railway Co. in favor of a competing proposal
from Canadian National Railway Co., a dramatic turn with big
implications for the shape of the U.S. rail industry.
The Wall Street Journal Thursday reported that Kansas City
Southern was expected to ditch the agreement. Canadian Pacific
Friday said it remains ready to re-engage with Kansas City
Southern. Canadian Pacific had earlier decided to hold firm on the
terms of its already-agreed deal with Kansas City Southern.
Canadian Pacific said it will proceed with its application with
the U.S. Surface Transportation Board seeking the board's authority
to "control KCS and its U.S. rail carrier subsidiaries." The
company has already received preliminary regulatory approval for
the deal.
Canadian Pacific had agreed in March to pay what was then worth
$275 a share--0.489 of its shares and $90 in cash. (The exchange
ratio was set before Canadian Pacific's recent five-for-one stock
split.)
Canadian National subsequently offered $325 a share, a proposal
it later sweetened to comprise $200 in cash and 1.129 shares of its
stock.
In sweetening its proposal, Canadian National agreed to add more
stock and cover the $700 million breakup fee Kansas City Southern
would owe Canadian Pacific for walking away from their existing
agreement. If an agreement with Canadian National ultimately fails
to get approval from regulators, the Canadian company would also
owe Kansas City Southern a $1 billion reverse breakup fee.
Write to Dave Sebastian at dave.sebastian@wsj.com
(END) Dow Jones Newswires
May 21, 2021 11:18 ET (15:18 GMT)
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