Kansas City Southern | CN has reached the CP, but the deal hasn’t reached the station yet

The Canadian National Railways (CN) won the conflict between the two largest railways in the country at Kansas City Southern (KCS) as the United States won its bid, although the deal will have to overcome obstacles before reaching its destination.

Julian ArsenaultJulian Arsenault

After CB refused to raise the $ 25.2 billion deal announced on March 21, US Railways terminated it on Friday, opting for the CN bid, which would give it $ 33.7 billion in value.

This deal, if completed, would allow the Montreal-based company to be the first North American railroad company to operate a network connecting Canada, the United States and Mexico.

“We are delighted that KCS has agreed to join forces with CN to create the first 21e Century, “said the president and CEO of Montreal Railways, Jean-Jacques Roest, in a press release.

The fate of the deal is now in the hands of the Surface Transportation Board – the head of US rail merger operations – an uncertainty that has prompted CP to remain in the background if the merger fails.

The CN will now have to persuade the regulator to accept its proposal to create a voting fund in which to hold KCS shares while reviewing the deal.

The voting fund will allow KCS shareholders to receive a full matching payment without having to wait for approval of the proposed batch by the US organization, which could last until early 2023.

A new application was due to be submitted to STB on Friday. The original CN request was rejected.

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“CNN felt this was relatively routine, but in our view it is still far from certain,” said analyst Cameron Dorxen of the National Bank of Finance in a note sent to its clients.

Although he was crowned by his rival, CP Chairman and CEO Keith Creel, who on more than one occasion expressed doubts about the chances of a merger between the CN and KCS, he did not give up.

The country program remains attentive

In a letter sent to STB on Friday, the latter indicated that it was ready to make a new offer by reminding that the US organization had already accepted CP’s request on confidence with voting rights.

The CP will be available to enter into a new agreement to acquire the KCS.

Keith Creel, President and CEO, CP

Consequently, Alberta is preparing to move forward without delay if the deal fails. Mr Creel said several recent events, including opposition from the US Department of Justice and the STB decision to rate the offer under stricter rules, should be enough for KCS to push the CN to back off.

STB has not considered a proposed merger into the rail sector since the 1990s, and the regulatory environment tightened in 2001, but the new rules have not been tested since then.

In the meantime, CN will be responsible for the estimated $ 700 million termination fee bill that has to be paid to the CP since terminating its agreement with the US carrier. The Montreal corporation would also have to pay KCS $ 1 billion if STB blocks the merger.

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Doerksen writes: “While a merger with KCS will undoubtedly be strategically positive for CN, we nonetheless believe that the company is exposed to significant financial risks.”

On the Toronto Stock Exchange on Friday afternoon, CN shares were trading at $ 126.14, down $ 2.13, or 1.66%. CP rose 1% to $ 81.39. On the New York Stock Exchange, KCS shares rose $ 1.40 to $ 295.01.

CN and KCS photo


  • Network of 31,500 km in Canada and the United States.
  • Revenue of 13.8 billion in 2020.
  • A workforce of 24,577 employees.


  • The network extends 11,400 km to Mexico.
  • Revenue totaled $ 3.25 billion last year.
  • About 6,500 workers.
  • Smallest Class A railroad in the United States (carriers made nearly $ 505 million and more in revenue in 2019).

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