By now you have heard about the proposed buyout of the Kansas City Southern Railroad (KCS). Earlier in March, Canadian Pacific (CP) offered to buy the railroad for a sum of $28 billion dollars, which included a payoff of $3 billion in KCS debt. It looked like a done deal.
Enter another Canadian player.
A month after the deal was announced and proceedings had started going forward, Canadian National Railroad (CN) swooped in with a larger bid for the KCS. Their offer was $33.7 billion. This brought the negotiations with CP to a quick halt, and talks began between KCS and CN. The battle over KCS is so heated is because KCS is the only Class 1 railroad with extensive operations inside of Mexico. Something that is very attractive to both Canadian-based railroads. This would offer a link that would be very viable with the USMCA trade pact.
Last week, the Kansas City Southern board voted to accept the bid from Canadian National. It just has to be approved by the Surface Transportation Board.
That?s where Canadian Pacific is bringing their battle to still be able to purchase KCS.
Former North Dakota Senator Byron Dorgan is acting as an advisor to the Canadian Pacific Railroad. He says that while he has never been a fan of railroad mergers, he says a merger between Kansas City Southern and CP would make the most logistical sense because it offers the best bet for a single line connection between Canada and Mexico and the Atlantic and Pacific Oceans.
Dorgan adds that allowing the Canadian National buyout eliminates competition because of so much facility overlap between CN and KCS.
Dorgan says that the Canadian Pacific bid offers a better opportunity for better service, especially in Iowa, by avoiding too many ?choke points? with single-rail service.
Dorgan says that Midwest would be hurt if the Surface Transportation Board approves the merger between the Canadian National Railroad and Kansas City Southern, it will open the flood gates for more and larger mergers.
There is no timetable for the Surface Transportation Board to make their decision. Any merger would also have to be approved by authorities in Mexico and Canada. Former Senator Dorgan is urging farmers and businesses to voice their support for the Canadian Pacific plan to the Surface Transportation Board.
