Kansas City Southern (KSU) - Get Report will enter potential merger talks with Canadian National, according to a published report Friday, raising the stakes in a brewing bidding war between Canadian National (CNI) - Get Report and Canadian Pacific (CP) - Get Report for the U.S. railroad and its links to the gulf coast.
Kansas City Southern is expected to declare CN’s recent $30 billion takeover bid superior to its previously agreed $25 billion buyout offer from Canadian Pacific, Bloomberg reported, citing people familiar with the matter.
CN made its unsolicited bid earlier this week as the carriers struggle to gain better access to ports along the Gulf of Mexico.
Opening talks with Canadian National won’t undo the existing takeover deal, according to the report. If Kansas City Southern deems CN’s offer is better, Canadian Pacific would have an opportunity to counterbid, according to the report.
The Canadian railroads have been sniping at each other in regulatory filings this week.
“Canadian Pacific believes that CN's proposal is illusory and inferior to the proposed CP/KCS transaction, and that a CN/KCS transaction would be contrary to the public interest given its adverse impacts on competition and other serious concerns,” CP wrote in a regulatory filing with the Surface Transportation Board
For its part, Canadian National countered Friday that its proposal “is a manifestly superior offer to KCS because the combined CN-KCS network can provide more public benefits by connecting the continent, promoting growth, and competing more aggressively with the trucking industry for long-haul movements."
Shares of Kansas City Southern rose $5.04, or 1.70%, to $301.62.
Canadian National shares fell $1.05, or 0.96%, to $108.86.
Shares of Canadian Pacific rose $3.15, or 0.86%, to $370.71 Friday.