Kansas City Southern in talks over rival Canadian domestic offer of $ 33.7 billion

Kansas City Southern Board of Directors to Consider a proposed offer of $ 33.7 billion of Canadian National, the latest twist in the battle for the takeover of the US rail operator that could lead to the biggest merger of the year.

Kansas City Southern has already entered into a merger deal with rival CN’s Canadian Pacific Railway, which offered $ 28.9 billion, including debt to acquire the U.S. company last month, but will undertake a review of the competing fiduciary offer to shareholders to assess the broader offer, CN said on Saturday.

Either of these transactions would create the first North American railroad crossing Canada, the United States and Mexico, and would be the continent’s largest transaction between rail operators since 1999.

“We believe that CN is the best proposition, the best partner, the best railway and the best solution for KCS and the North American economy,” said Robert Pace, Chairman of the Board of Directors of Canadian National in a press release.

Calgary-based Canadian Pacific Railway said the Kansas City board’s review of the competing bid “is simply fulfilling its obligations under the CP merger agreement.” He added that “we are encouraged to [Kansas City Southern] will take a close look at the details of CN’s offer as soon as possible, which we believe will cause them to question the real value and transaction certainty of their proposal.

Kansas City Southern did not immediately respond to a request for comment. A person close to the company had previously told the Financial Times that Canadian National’s bid could face closer scrutiny by the U.S. regulator, the Surface Transportation Board.

The timing of the review of the offers was not immediately clear.

At $ 325 per share, including $ 200 in cash, the Montreal-based Canadian National offer represents a 21% premium over the Canadian Pacific offer, at $ 275 per share including $ 90 in cash, the rest being in stock.

The two Canadian companies operate in the central and eastern United States, along with their rivals CSX and Norfolk Southern. Kansas City Southern is the smallest of seven Class 1 rail operators in the United States, but the only one to operate north to south with a network of routes stretching from Missouri to both coasts of Mexico.

The last major rail deal came at the turn of the 20th century, when CSX and Norfolk Southern jointly acquired Conrail.

Additional reporting by James Fontanella-Khan and Ortenca Aliaj

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