Last week, we talked about the competing bids from the Canadian National Railway (CN) and The Canadian Pacific Railroad (CP) for the Kansas City Southern Railroad (KCS). The KCS is up for sale and the only class 1 railroad in the United States that has operations in Mexico. Being bought by a Canadian-based railway would give some advantages to the USMCA trade pact.
There have been some new developments.
Last week, Canadian Pacific said that they had no plans to up their bid of $28 billion for KCS. After negotiations had started, CN swooped in with a bid of $33.7 billion. The KCS Board approved the offer and stopped negotiations with CP right on the tracks. CP has asked the KCS to turn down the CN offer because it faces a steeper battle for approval with regulatory agencies like the U.S. Surface Transportation Board. If the CN bid goes through, it will make it the third-largest railroad in America and open the doors for larger railroad monopolies, according to former North Dakota Senator Byron Dorgan. Dorgan is now an advisor to the Canadian Pacific.
Now, the Canadian National?s largest investor is urging them to pull out of the deal. TCI Trust believes that the bid made by the normally financially conservative CN railway is ?reckless?, especially if it is approved by government agencies.
Deb Miller is a former commissioner with the U.S. Surface Transportation Board and agrees that a CN-KCS merger would open the door to railroad monopolies, while the CP bid has a much smaller chance of that happening.
This sentiment was echoed by Jason Siedl of Cowan and Company, which is a transportation analytics firm. He says the CN bid, while not impossible to approve, poses a much larger threat for Class One railway mergers. That means less competition in the marketplace.
Siedl adds that whichever railroad ends up the victor in this bidding war, they will be the USMCA railroad. That is going to be a big selling point for any railroad that wants to attract the business of those companies who trade heavily on the trade pact between the U.S., Mexico, and Canada.
Any approval for a bid will take at least 18 months to implement, and there is still no guarantee that an approval by the U.S. Surface Transportation Board will be the final nail in the coffin for CP. It still must be looked at by the Federal Trade Commission and the Department of Justice. That doesn?t take into account any approvals that need to be made by similar agencies in Canada and Mexico.
As for this reporter, I will just stick to the railroads I can handle.
Photo by Dustin Hoffmann
