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Canadian Pacific May Offer $300 a Share For Kansas City Southern: Report

Move would reignite bidding war with Canadian National Railroad preparing to offer $300 a share for U.S. rail operator to counter rival Canadian National’s bid.
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Canadian Pacific  (CP) - Get Canadian Pacific Railway Limited Report is preparing to offer $300 a share for Kansas City Southern  (KSU) - Get Kansas City Southern (KSU) Report, reigniting a battle between it and rival Canadian National  (CNI) - Get Canadian National Railway Company Report for the U.S. rail operator, according to a published report Monday.

Canadian Pacific’s board met Monday to approve the offer, which values Kansas City Southern at about $27 billion, The Wall Street Journal reported, citing people familiar with the matter.

Shares of Kansas City Southern were active in after-hours trading following the report.

Kansas City Southern and Canadian National shareholders are slated to vote later this month on approving Canadian National’s bid for the company. Under the terms of the deal, KCS shareholders will receive $200 in cash and 1.129 shares of CN common stock for each of their shares. KCS shareholders will hold 12.65% of the combined company, according to a joint statement released by the companies earlier this spring.

The agreement came after KSU abandoned an earlier agreement to be acquired by Canadian Pacific for $275 a share in cash and stock. The railroad paid Canadian Pacific a $700 million breakup fee which will be reimbursed by Canadian National.

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Kansas City Southern operates an extensive rail network in Mexico, making it attractive as a tool for transporting automobiles from assembly plants there to markets in the Midwest and elsewhere. 

Shares of Kansas City Southern rose $16.10, or 6%, to $285.70 in after-hours trading.

Canadian Pacific shares fell $2.46, or 3.4%, to $70.25.

Canadian National shares rose $1.69, or 1.6%, to $109.70. in after-hours trading.

Last month Kansas City Southern posted weaker-than-expected results for the latest quarter.