Canadian National Gains After Dropping Bid for Kansas City Southern

Canadian National Gains After Dropping Bid for Kansas City Southern
Canadian National Gains After Dropping Bid for Kansas City Southern

By Dhirendra Tripathi

Investing.com – Canadian National stock (NYSE:) rose 4.3% Wednesday as it bowed out of the race to acquire Kansas City Southern (NYSE:).

The decision paves the way for Canadian Pacific Railway (NYSE:) to acquire the U.S. railroad company. Kansas City traded 1.1% higher while Canadian Pacific rose 1.4%.

Canadian National is entitled to a $700-million break-up fee from the U.S. railroad, in addition to the $700 million it paid Kansas City to pass on to Canadian Pacific as a break-up fee for terminating their March deal.

“. . .There have been significant changes to the U.S. regulatory landscape since CN 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,” Canadian National said in a note.

In measures announced in July, the Biden administration tightened rules to promote competition and discourage antitrust practices in industries. This included telecom, airlines, railroad and several other sectors.  

The bidding for Kansas City started in April when Canadian Pacific first offered to buy the company, valuing it at $25 billion. Canadian National made it a contest with its $33.7 billion cash-and-stock offer that Kansas City then accepted.

 

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