© Reuters. The Canadian Pacific Railroad is pictured in Port Coquitlam
By Juby Babu and Kanishka Singh
(Reuters) -Canadian Pacific Railway on Saturday welcomed a positive regulatory decision related to its proposed merger with Kansas City Southern (NYSE 🙂 on the same day that Kansas City said its board of directors had decided that a competing bid was from Canadian National Railway could be expected to result in a "superior proposal".
Kansas City Southern said the board of directors made its decision unanimously and announced that it would enter into negotiations with Canadian National despite being "still bound by the terms of the CP merger agreement." It found that its board of directors "failed to determine" that the CN proposal was "in fact superior to a company's proposal."
Canadian Pacific The (NYSE 🙂 cash and stock offering of $ 25 billion at the time the deal was announced in March values Kansas City Southern at $ 275 per share.
Canadian National's competing cash-and-stock offering made earlier this week rates Kansas City Southern at $ 325 per share.
Canadian Pacific on Saturday touted a decision by the U.S. Surface Transportation Board, which oversees the rail freight operator, that a waiver of stricter merger rules granted to Kansas City Southern in 2001 would apply to a merger of Kansas City and Canadian Pacific would.
The pre-2001 rule assesses a proposed merger as to whether it would affect competition. The rule introduced in 2001 requires applicants for rail mergers to demonstrate that a proposed merger is in the public interest. Kansas City Southern had been granted the waiver due to its small size.
The STB confirmed Friday that the waiver it granted Kansas City Southern in 2001 applies to the proposed amicable combination of the two companies.
Both companies expect the STB review to be completed by mid-2022.
According to the regulator, the merger would result in the smallest Class I railroad based on U.S. operating revenues and also result in few overlapping routes.
Following Canadian National's rival $ 33.7 billion offer for Kansas City Southern on Tuesday, CP said it would not increase its offer.
The Canadian National Railway said in a statement Saturday that it looked forward to working with Kansas City to finalize a merger agreement and that it welcomed the determination of the Kansas City Southern board of directors.
In response, Canadian Pacific said that the Kansas City Southern board of directors was merely fulfilling its obligations under the merger agreement with CP and fulfilling its "fiduciary duty" to its shareholders by evaluating Canada's national offering.
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