CANADIAN NATIONAL ENTERS BIDDING WAR WITH CANADIAN PACIFIC FOR KANSAS CITY SOUTHERN

It's not truly over until KCS is merged into CN, or the merger is denied...

Well, well, well . . .

The Wall Street Journal is reporting that CP’s board met today to authorize a new offer worth about $300 per share. That’s up about $25 from CP’s final offer to KCS, but still short of Canadian National’s offer that’s valued at about $325 per share.

From Trains Magazine:

CALGARY, Alberta — Is Canadian Pacific preparing a higher offer for Kansas City Southern?

The Wall Street Journal is reporting (paywalled) that CP’s board met today to authorize a new offer worth about $300 per share. That’s up about $25 from CP’s final offer to KCS, but still short of Canadian National’s offer that’s valued at about $325 per share.

https://www.trains.com/trn/news-reviews ... -southern/

Unless CP raises their bid higher than CN's, I don't think this is going to sway many stockholders... A friend suggested that CP could be doing this to get CN to come to the table concerning the split, but that doesn't seem like a likely outcome to me...

If I were CP, I would bring in a third-party infrastructure fund to help fund this acquisition. Blackstone has had an interest in both CP and KCS in the past, maybe they are still interested. I don't know how wise that would be though considering many (including myself and Buffett) believe that CP and CN are willing to pay far too much for KCS. The saga continues.

There was talk of CP trying to raise their bid earlier, but I thought the conventional wisdom at the time was that CP didn't have the balance sheet resources to be able to do so without adding a mountain of debt they might not be able to support longer term. They'd need to bring in another partner with cash.

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The big question is STB approval of the CN voting trust. If the voting trust is approved all KCS stockholders have to do is say YES and they get a 18% return on their current investment (based on Friday's close). Say NO and KCS kas to pay a penalty to CN and repay the penalty CN paid CP on their behalf. If the STB says no to the voting trust then KCS is off the hook for the penalty.

Financially (for the shareholder) it would make more sense to take the 18% return on investment. The STB does not need to approve the final transfer of control for KCS shareholders to get paid. But it all hinges on whether the CN voting trust is approved. And I wonder if CP's offer will hold at now $300 if the voting trust is not approved and KCS stock falls back to the value it had before the CN bid.

How long will it take the STB to decide on the CN voting trust? If KCS agrees to CP's new offer & terminates CN, then they have to pay the penalty to CN. As you said, if they wait for the STB decision they risk CP reducing their offer. It's a matter of probability & gambling, and now that we are in a high inflation environment the time value of money calculus changes...and borrowing costs will be increasing, especially if they have to stretch to fund the purchase.

It is the STB's clock. They can take as long as they want. Especially since they have to give the voting trust a full review under the current rules.
It was easy to give approval to the CP voting trust under the old rules.

STATEMENT FROM SURFACE TRANSPORTATION BOARD THAT IT ANTICIPATES RULING ON THE CN AND KCS VOTING TRUST MOTION BY AUGUST 31, 2021

The Board has also received many inquiries from industry stakeholders, the public, and the media as to the timing of a Board decision on the pending voting trust motion, particularly in light of the anticipated vote of the KCS shareholders on the proposed merger, which is currently scheduled for August 19, 2021. In response to these inquiries and to provide as much information as is possible with respect to the timing of a decision, the Board is issuing this statement today to announce that the Board expects to issue a decision on the proposed voting trust no later than August 31, 2021.

justalurker66 wrote: ↑Mon Aug 09, 2021 9:23 pm The big question is STB approval of the CN voting trust. If the voting trust is approved all KCS stockholders have to do is say YES and they get a 18% return on their current investment (based on Friday's close). Say NO and KCS kas to pay a penalty to CN and repay the penalty CN paid CP on their behalf. If the STB says no to the voting trust then KCS is off the hook for the penalty.

Financially (for the shareholder) it would make more sense to take the 18% return on investment. The STB does not need to approve the final transfer of control for KCS shareholders to get paid. But it all hinges on whether the CN voting trust is approved. And I wonder if CP's offer will hold at now $300 if the voting trust is not approved and KCS stock falls back to the value it had before the CN bid.

Minor mistake in your statement, KCS does not have to refund CN's advance if the voting trust is rejected. If the CN's Voting Trust request is rejected and CN and KCS both wish to continue then CN must raise its bid by $1 billion and KCS will not have to repay the $700 million advance. If the merger application itself is finally rejected CN is out the additional $1 billion, plus the $700 million advance used to pay off CP. If KCS walks away at the point of CN's Voting Trust being rejected then it must refund the $700 million, but it owes CN nothing more. The only thing where KCS would owe CN would be if they were to walk away before the STB ruling on CN's Voting Trust, in which case they must refund CN's $700 million advance and pay CN $1 billion. There are a few highly unlikely conditions that could happen but this covers most cases.

JayBee wrote: ↑Wed Aug 11, 2021 12:09 pm

justalurker66 wrote: ↑Mon Aug 09, 2021 9:23 pm The big question is STB approval of the CN voting trust. If the voting trust is approved all KCS stockholders have to do is say YES and they get a 18% return on their current investment (based on Friday's close). Say NO and KCS kas to pay a penalty to CN and repay the penalty CN paid CP on their behalf. If the STB says no to the voting trust then KCS is off the hook for the penalty.

Financially (for the shareholder) it would make more sense to take the 18% return on investment. The STB does not need to approve the final transfer of control for KCS shareholders to get paid. But it all hinges on whether the CN voting trust is approved. And I wonder if CP's offer will hold at now $300 if the voting trust is not approved and KCS stock falls back to the value it had before the CN bid.

Minor mistake in your statement, KCS does not have to refund CN's advance if the voting trust is rejected.

Please re-read what you quoted: "If the STB says no to the voting trust then KCS is off the hook for the penalty."

justalurker66 wrote: ↑Wed Aug 11, 2021 3:18 pm Please re-read what you quoted: "If the STB says no to the voting trust then KCS is off the hook for the penalty."

I am sorry I don't know what the heck I was reading.

Prophetic:

For the past week, I had been overseas. Now yesterday, as the Limo - a Toyota Mini Van, was X-ing the Bensenville viaduct heading South and in the extreme right hand lane, I could not help but note a KCS SD-90 and a CP C-44 coupled to a train that I presume would be heading North.

Must say; if I'm doing the driving, there is no "rubbernecking", but this time, the privilege was mine!

All I could think was now isn't that a little "moot"?

Until after opening the Edge headline page, and reviewing Messrs. JayBee and Lurker's immediate reports; it's a new ballgame, volks.

https://www.msn.com/en-us/money/compani ... d=msedgntp

Fair Use:

Canadian Pacific (NYSE: CP) has submitted a new, sweetened bid for Kansas City Southern (NYSE: KSU) in a last-minute attempt to derail KCS's planned sale to Canadian National (NYSE: CNI).

The new CP bid, which values the target at about $31 billion, is still less than the $33 billion Canadian National deal price. But given the regulatory uncertainty surrounding the Canadian National/Kansas City Southern tie-up, price isn't everything. The Canadian Pacific offer is likely high enough to get the attention of some KCS investors, setting up a dramatic finish to this takeover saga.

Voting no will cost KCS $1.4 billion dollars and end the chance of shareholders getting that 18% jump in value. Voting yes and having the STB deny the trust gives KCS a $1 billion payoff.

Perhaps enough shareholders will take the risk and hope that CN will respond to a "no" vote with a higher offer. CN has increased their offer once. Why not do it again?
Making another offer would also allow CN to continue to work with KCS until the STB decides on the voting trust.

Predictable:

Associated Press

Fair Use:

OMAHA, Neb. (AP) — Kansas City Southern railroad is trying to keep its $33.6 billion merger with Canadian National on track by rejecting a competing $31 billion bid from rival Canadian Pacific earlier this week.

Kansas City Southern said Thursday that its board unanimously decided to continue backing Canadian National’s higher offer. KCS shareholders are scheduled to vote whether to accept CN’s offer on Aug. 19, but the U.S. railroad said it may now delay that vote if the U.S. Surface Transportation Board doesn’t issue its decision on a key part of Canadian National’s acquisition plan before Tuesday.

The STB said earlier this week that by Aug. 31, it will issue its decision on Canadian National’s proposal to use a voting trust that would acquire Kansas City Southern and hold the railroad during the STB’s lengthy review of the overall deal. Failure to get that key approval would likely derail the deal.

Gilbert B Norman wrote: ↑Thu Aug 12, 2021 6:35 pm Predictable:

Equally predictable is that firms that advise Institutional investors, such as Glass Lewis, are recommending that shareholders withhold casting their ballots until after the STB announces its decision regarding CN's request for a voting trust, which the STB has said it will render no later than August 31st, 2021.

JayBee