Testy Train Track Bidding War

Apr 23, 2021

If you’re looking for a good deal on a cross-continent railroad, well… let’s just say it’s not a buyer’s market.

Just weeks ago, Canadian Pacific Railway (CP) revealed it had agreed to purchase the Kansas City Southern railroad for a sweet $29 billion. The purchase would create a 20,000-mile North American mega-track allowing commodities to move via rail across the United States, Mexico, and Canada.

And timing couldn’t be better: As pandemic-related disruptions begin to subside, supply chains are moving commodities around at lightning speed.

But not so fast…

Rival railroad behemoth Canadian National Railway Co. (CN) noted the proposal and decided to one-up their competitor. CN slid a contract across the table with a $33.7 billion offer.

Chairman of CN, Robert Pace, spoke to the superiority of their offer being a ‘more complimentary strategic fit’ and having ‘enhanced benefits for employees and local communities.

Those are fightin’ words. CP clapped back at the petty move, stating, ‘The Canadian National management team has significantly underperformed over a decade and has a track record of underdelivering against its own projections.

Let the bidding war begin. Kansas City Southern said it would evaluate the CN offer and ultimately give CP a chance to raise its bid if they found the deal superior.

Regulation might decide the victor. The heavy geo-overlap between CN and Kansas City Southern could make it hard to get approval via the Surface Transporation Board. Now many are speculating which will matter more: price or getting a deal over the finish line.