Sumary of Canadian Pacific Clinches $27-Billion Kansas City Southern Deal as Rival Bows Out:
- Kansas City Southern shares were little changed at $281.55 in Wednesday trading in New York.
- Canadian National suffered a blow when the U.S. Surface Transportation Board (STB) rejected a temporary “voting trust” structure last month that would have allowed Kansas City Southern shareholders to receive the deal’s consideration without having to wait for full regulatory approval.
- Canadian Pacific has had its proposed voting trust cleared by the STB and so Kansas City Southern shareholders will receive the $300 per share in cash and stock even if the regulator shoots down the deal.
- The regulatory certainty this provided convinced Kansas City Southern’s board 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 pursuit of Kansas City Southern.
- This is because a new offer would need to compensate Kansas City Southern for the regulatory risk of sticking with the Canadian National deal.
- “There have been significant changes to the U.S. regulatory landscape since Canadian National launched its initial proposal which have made completing any Class I merger much less certain, including an executive order focused on competition issued by President Biden in July,” the company said in a statement on Wednesday.
- It is now entitled to a $700 million break-up fee from Kansas City Southern, in addition to the $700 million it paid the latter to pass on to Canadian Pacific as a break-up fee for terminating their March deal.