If Canadian Pacific does not top Canadian National’s $33.6 billion offer for Kansas City Southern in the next five days, a CN-KCS merger would proceed toward the approval process.
First, KCS shareholders must approve the deal announced yesterday, which would give them $200 per share in cash, along with 1.129 shares of CN common stock, for a total value of $325 per share based on CN’s May 12 closing price. That’s a 45% premium to the value of KCS shares on March 19, the last trading day before CP and KCS announced their merger plan.
KCS shareholders would not receive their cash and shares until the company is put into an independent voting trust. The U.S. Surface Transportation Board approved Canadian Pacific’s plan to put KCS into a trust, but is still reviewing CN’s identical trust proposal. CP contends that CN’s trust proposal should face a tougher regulatory review because the CN-KCS merger will be judged under the STB’s more stringent 2001 merger review rules.
CN insists that its trust will gain regulatory approval. Once approved, CN would place KCS into the voting trust sometime in the second half of this year. KCS would then be run independently, with former KCS CEO David Starling acting as trustee.
CN also would seek regulatory approval in Mexico. No regulatory approval is required in Canada, and CN shareholders do not have to vote on the deal.
CN later this year will submit a formal merger application to the STB. CN expects the STB to approve the KCS merger by the second half of 2022. CN would then gain control of KCS.
CN has said that KCS will continue to operate under its own name in the U.S. and Mexico. Kansas City, Mo., will be the U.S. headquarters of the combined CN-KCS. CN’s U.S. operating and maintenance facilities would remain open.
Or this scenario. CN puts KCS in a voting trust and buys the RR. The STB denies the merger and has to sell KCS for less than they pay for it. CP merges with KCS.
Or, after the merger is denied, CN & CP agree to a split of KCS that gets CN into KC, CP into New Orleans, and both into Mexico.
If CN gets KCS and CP decides to merge with someone, I suggest UP. If CN responds be merging with UP, that puts KCS in the BNSF camp, which is good since UP already dominates the South Central region.
My preference is the CN/CP split of KCS. Competition is good for customers.
How’s this for a scenario: After CN acquires KCS, CP and NS come together to make a deal. CSX cries foul. BNSF and UP get into a bidding war over who gets CSX. Both decide to divide it up a la Conrail.
How many more trains will CN run through the ‘burbs of Chicago to make use of KCS?
Will CN need the ex IC if this goes through?
Don’t forget everyone what Elmo Harrison did to IC ……! also notice:1. Is the STB going to let CN continue after PanAm Rail
2. Will CN get the CSX Massena line & have an absolute
monopoly into Syracuse ?
3. Are the states of Missouri, Oklahoma, Arkansas &
Louisiana going to allow CN to abandon most of the
KCS mainline?
4. Is NS management going to do nothing when CN has
the right to use the Meridian Gateway and/or PAR?
We’ll see if CN mgmt.needs to be “shown the door” in any, if not ALL of these situations!
Start the countdown clock till CN moves their Canadian headquarters to KC as well.