MONTRAL, Que. – The Canadian National Railroad offered $33.7 billion to buy the Kansas City Southern. The offer was almost 21% more than rival Canadian Pacific had offered. At stake for both Canadian railroads is a through route deep into Mexico for speedier and more efficient service linking points in Mexico, the United State and Canada. CN said its proposal would create $1 billion in synergies and recapture truck traffic. The CP deal with Kansas City Southern seemed locked up in March. If Kansas City Southern now goes with the higher CN offer, it will owe CP $700,00 in merger break-up penalties.
Winona impact
A KCS-Canadian Pacific merger would swell CP’s trunk line through Winona. A KCS-Canadian National merger, on the other hand, would move the Mexico-Canada traffic ro CN’s central Wisconsin tracks that go through Neenah, Stevens Point and Ladysmith to Superior. The primary goal of both mergers is moving Mexico-manufactured parts and goods to Chicago, Detroit and eastern Canda.
Minneapolis impact
It would be good news for the depressed downtown Minneapolis real estate market if Canadian Pacific loses out in the battle for KCS. CP has plans to move its Minneapolis offices and 200 employees to Kansas City if its offer goes through.
Either way. Kansas City Southern shareholders stand to make bundles from Canadian rivals’ take-over offers.