/Kansas City Southern surges 16% after $34 billion offer from Canadian National sparks bidding war

Kansas City Southern surges 16% after $34 billion offer from Canadian National sparks bidding war

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  • Kansas City Southern surged as much as 16% on Tuesday after it received a competing $34 billion take-over bid from Canadian National.
  • Canadian National’s deal is well above Canadian Pacific’s, which had offered $25 billion for the railroad operator in late March.
  • Canadian National’s $325 per share offer represents a 27% premium from Kansas City Southern’s Monday close.
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Kansas City Southern has a good problem on its hands, as two Canadian railroad operators compete to buy the Missouri-based company.

On Tuesday, Canadian National offered a $34 billion takeover bid for Kansas City Southern, well above Canadian Pacific’s $25 billion offer late last month. The new bid sparked a 16% surge in shares of Kansas City Southern on Tuesday.

Canadian National’s offer assigns an enterprise value of $33.7 billion to Kansas City Southern. The proposal of a $325 per share buyout represents a 27% premium to Kansas City Southern’s close on Monday.

“Together, CN and KCS will create the premier railway for the 21st century, seamlessly connecting ports and rails in the United States, Mexico and Canada,” Canadian National said of the proposed deal. Canadian National expects to realize annual EBITDA synergies of $1 billion.

Under Canadian National’s proposed deal, Kansas City Southern shareholders would receive $200 in cash per share, along with 1.059 shares of Canadian National. The deal represents a 21% improvement over the deal offered by Canadian Pacific.

As Kansas City Southern weighs the competing offers, shares of Canadian National fell by as much as 8%, while Canadian Pacific fell by 1% in Tuesday trades.

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