Kansas City Southern (KSU) - Get Report shares soared higher Tuesday after Canadian National (CNI) - Get Report offered $30 billion for the network operator as it swoops in to top an agreed takeover by rival Canadian Pacific (CP) - Get Report.
Canadian National said it will offer $200 in cash, as well as company stock, in a deal that values Kansas City Southern at $325 per share, a 45% premium to the stock's closing price on March 19 and a 21% improvement to Canadian Pacific's agreed $25 billion bid.
“CN is ideally positioned to combine with KCS to create a company with broader reach and greater scale, and to seamlessly connect more customers to rail hubs and ports in the U.S., Mexico and Canada," said CN CEO Jean-Jacques Ruest. "CN and KCS have highly complementary networks with limited overlap that will enable them to accelerate growth in single-owner, single-operator, end-to-end service across North America."
"With safer service and better fuel efficiency on key routes from Mexico through the heartland of America, the result will be a safer, faster, cleaner and stronger railway,” he added.
Kansas City Southern shares surged 15.2% in early trading following news of the competing bid to change hands at $295.00 each. Canadian National's U.S.-listed shares slumped 6.2% to $110.80 each while CP edged 0.1% lower to $365.00 each.
Last month, Kansas City Southern agreed to the Canadian Pacific that valued the group at $275 per share, with shareholders receiving 0.489 of a Canadian Pacific shares for each holding, as well as $90 in cash.
The combined group, which the two companies said would be run by CP CEO Keith Creel, was to be based in Calgary and operate around 20,000 miles of track, employ nearly 20,000 people and generate nearly $9 billion in annual revenues.
Last week, Kansas City Southern posted weaker-than-expected first quarter earnings as the polar vortex and coronavirus shutdowns hit cargo volumes, but confirmed its full-year profit guidance, with CEO Patrick Ottensmeyer calling the Canadian Pacific takeover "an exciting opportunity for KCS and CP stakeholders"
Kansas City Southern said profits for the three months ending in March fell 14.3% to $1.68 per share, missing the Street consensus forecast, while revenues slumped 4% to $706 million as carload volumes fell 1% from last year.
Looking into the current financial year, Kansas City Southern reiterated its forecast that sees double-digit revenue growth, earnings north of $9 per share and an operating ratio of 57.5%.