Canadian National Railway Co. has hinted at a possible bidding war over one of the industry’s biggest deals when it offered $30 billion to grasp Kansas City Southern away from a rival.
Montreal-based Canadian National in a statement said that the $325-a-share bid consists of $200 cash and 1.059 Canadian National shares for each of Kansas City Southern. The company gave its offer an enterprise value of $33.7 billion.
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The bid is higher by 20% than the deal which was made with Canadian Pacific Railways Ltd. last month for $25 billion.
The fight is over a railway network that connects the U.S., Mexico, and Canada within the first year of a trade alliance between three countries. Kansas’ rambling systems connect to the farms in the U.S. Midwest, which further connects to the Gulf in Mexico.
Canadian National said that their offer could achieve $1 billion in earnings by converting the truck traffic to rail. The deal has projected to boost the revenue in the first year.
“But we think Canadian National understood the competitive challenges this deal could present, given the much broader geographic reach of the pro forma CP network,” wrote Stephens analyst Justin Long as he was surprised at the Tuesday deal offered by the CN.
Kansas City Southern went up by 15% to $295.24 in New York. Canadian National, on the other hand, slumped by 6.3% to $138.78 in Toronto on Tuesday. Canadian Pacific sat at $457.42, with almost no change.
The two Canadian Railroads’ rivalry go way back. Canadian National privatized by the government in the 1990s and outperformed its smaller competitor for much of the early 2000s.
In 2016, Canadian Pacific had paid C$25 million ($20 million) to Canadian National to settle a lawsuit, as the latter has claimed that CP pilfered customer list using employees that moved between the companies.