Canadian Pacific (NYSE: CP) slammed a bid by rival CN (NYSE: CNI) to acquire Kansas City Southern (NYSE: KSU), describing CN’s proposal as “massively complex and likely to fail” because it decreases competition and raises antitrust concerns, according to CP.
On Tuesday, CN offered to acquire KCS in a cash-and-stock transaction valued at $33.7 billion. Less than a month ago, CP and Kansas City Southern (KCS) announced that they are planning to merge, pending regulatory and shareholder approval, in a deal worth $29 billion.
“Canadian National’s (‘CN’) proposal is illusory and inferior because it creates adverse competitive impacts and raises other serious public interest concerns,” CP said. CN earlier Tuesday described its bid as a “superior proposal” to CP’s offer.
CP continued, “CN’s proposal increases regulatory and anti-trust risk for KCS shareholders and decreases benefits for customers, employees and other stakeholders.”
CP said CN’s proposal would result in the third-largest Class I railway and “destabilize” the competitive balance of the North American rail industry. CP said it has garnered support from over 400 shippers and other stakeholders for the merger, which CP and KCS hope would be finalized after the Surface Transportation Board reviews the proposal later this year and into 2022.
CP contends CN’s proposal would reduce independent routing options between the Upper Midwest and Gulf Coast from four to three, as well as eliminate head-to-head competition for large numbers of shippers at numerous locations across KCS’ system.
“A combination of CP and KCS enhances competition, creating new and stronger competitive options against existing UP, BNSF and CN single-line routes, as well as trucks,” CP said. “One prime example is it would benefit the U.S. Upper Midwest grain-growing regions of the Dakotas, Minnesota, and Iowa, where CP/KCS will inject new competition for shippers now beholden to UP and BNSF to reach the Gulf and other end markets. The Canadian National proposal would not bring these benefits.”
The railway also asserts that existing competition between CN and KCS in an area between Baton Rouge, Louisiana, and New Orleans is much more robust than how CN describes it. CP insisted that CN and KCS compete against each other in western Iowa and eastern Nebraska as well.
CP also touted its safety record and its ability to provide value to shareholders over CN.
Earlier Tuesday, KCS acknowledged that it had received an offer from CN. In a statement, KCS said, “The KCS board of directors will evaluate CN’s proposal in accordance with the terms of KCS’ merger agreement with CP, and will respond in due course. The KCS board of directors has not made any determination with respect to CN’s proposal at this time.”