Rail auction war escalates, with passenger line from Baton Rouge to New Orleans in the mix | Company

Canadian Pacific again embarked on a bidding war on Tuesday for Kansas City Southern against a competitor that has already secured Louisiana backing for its plan to sell a 70-mile rail line from Baton Rouge to New Orleans for possible use as a passenger rail service.

Canadian Pacific has increased its bid to $ 31 billion for the U.S. Railroad, but its latest offer falls short of the competing $ 33.6 billion Canadian National offer that Kansas City Southern accepted in May.

Nonetheless, Canadian Pacific’s new offer will give Kansas City Southern shareholders more thought before they vote on the deal with CN on August 19. Investors are also still waiting to see if the U.S. Surface Transportation Board will approve a key component of considering acquiring Kansas City Southern, and that decision could come any day.

Kansas City Southern is attractive to both Canadian railways, as it controls critical cross-border routes to Mexico, so either deal would benefit from expanding trade across North America. North. And the fact that KCS is the smallest of the major US railroads also makes a deal more likely to be approved by regulators who remain reluctant to sign any merger involving any of the larger railroads.

Canadian National, based in Montreal, Que., Appeared keen to own Kansas City Southern with a $ 33.6 billion take-over bid in May when Canadian Pacific, in Calgary, Alta., Refused to increase. its own offer of $ 25 billion. Canadian Pacific has urged Kansas City Southern shareholders to reject Canadian National’s higher bid because, it says, it faces a tougher antitrust fight with regulators also taking into account the potential for an increase in rail congestion around Chicago.

In Louisiana, Governor John Bel Edwards, Mayor-President Sharon Weston Broome, the Port of New Orleans, and the Baton Rouge Area Foundation have all filed letters with the US Surface Transportation Board in support of the Canadian National agreement, the railway announced in June.

Canadian National announced in May that it would sell the Baton Rouge rail line from Kansas City Southern to New Orleans to help gain regulatory approval. It is the only area of ​​overlap between the two rail networks.

One possibility could be that the section of railroad owned by Canadian National could handle the freight and that the old Kansas City Southern line would have passenger service or passenger service with a limited amount of freight, officials said.

Canadian Pacific officials have said their railroad could mix freight and passenger service between Baton Rouge and New Orleans and that it has such deals with Amtrak in other markets.

On Tuesday, Canadian Pacific said its new proposal now has terms similar to those of Canadian National’s offer, but that its offer provides “considerably higher regulatory certainty.”

Canadian Pacific has argued that allowing CN to buy Kansas City Southern would hurt competition in much of the central United States, as these railways operate parallel rail lines that connect the Gulf Coast to the Midwest. . CP officials also said CN’s plan would worsen rail congestion in the Chicago area and likely spur other railways to attempt mergers.

Canadian National said it believes it can address competition concerns through its operating plan and by selling the 70-mile South Kansas City track that overlaps between New Orleans and Baton Rouge. Canadian National said that after the merger it would also maintain its connections with other railroads to allow customers to ship goods using a combination of different railroads if they so desired.

Analysts said Canadian Pacific likely still faces an uphill battle to persuade Kansas City Southern shareholders to reject Canadian National’s higher offer, but the new offer is more competitive.

“They definitely made the decision a little harder,” said Edward Jones analyst Jeff Windau.

Kansas City Southern said Tuesday its board will review CP’s new proposal and respond to it later.