Canadian National Railway Co announced their offer to acquire railroad operator Kansas City Southern for $30 billion, potentially snatching the company from their rival suitor, Canadian Pacific. The bid is approximately 20% higher than the proposal from the Canadian pacific. KSU stock price had a substantial increase adjacent to the news.
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Kansas City Southern (KSU) shares have surged 14.62% at $293.88 in Tuesday’s premarket session. For the last six months, the stock soared 39.34%, and over the last three months, the stock has had an increment of 20.49%.KSU traded 1.36 million shares, which was above its daily average of 1.03 million shares over 100 days.
Now what
Canadian National railway’s offer includes $200 in cash and 1.059 Canadian National shares, which brings the potential acquisition to take place at $325 per KSU share, or $30B in total. KSU provides a network route between the U.S. Mexico and Canada in the first year of a trade alliance between the three countries.
Kansas City also links various farms in Kansas and Missouri to several ports in Mexico, which are extremely significant for the trade alliance between the countries. It also has various routes within Mexico, which brought approximately half of the Kansas City, Missouri-based rail operator’s revenue in the previous year.
In March, Canadian Pacific had an agreement to acquire Kansas City for a $25 billion cash-and-stock deal, however, Canadian National Railway offered a superior proposal. Canadian Pacific aimed to construct the first railway traveling across the United States, Mexico, and Canada, which would have been beneficial to the company after the new trade deal between the countries.
The combined group was expected to operate at around 20,000 miles of track, consisting of 20,000 employees, and generate approximately $9 billion in annual revenue.
Conclusion
Acquisition for KSU has been in high demand after the trade alliance between US, Canada, and Mexico. Furthermore, the potential for huge expansion and providing lucrative networks such as alongside the ports at the Gulf of Mexico has further induced investor interest with KSU stock price increasing immensely.
