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Thread: Canadia Pacific and Kansas City Southern to Merge

  1. #11
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    Quote Originally Posted by cnwfan View Post
    I don't think any railfan likes mergers. Not sure where that comment comes in at, but from viewing the KCS fan page everyone doesn't like the idea!
    I don't know, there are some folks on facebook all giddy and starting to come up with their own theories, fantasy and what ifs with this whole thing. Getting all too excited for something that will either become dead in the water, or destroy what we have.
    https://i.imgur.com/LPZNEX4.png

  2. #12

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    Quote Originally Posted by CSRX View Post
    I don't know, there are some folks on facebook all giddy and starting to come up with their own theories, fantasy and what ifs with this whole thing. Getting all too excited for something that will either become dead in the water, or destroy what we have.
    This is true , People think this is a done deal ! Watching from the sidelines as well is fun with this merger. They forget that STB has to approve of it first !
    Todd
    Iowa Chicago and Eastern Mason City Sub

  3. #13

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    It's rare for a merger to be announced without some degree of negotiations already having taken place with the regulators. My guess is STB had a pass at the proposal in advance.

    The only real wild card I see is Warren Buffet. Can he play spoiler thru political connections? He's a huge Biden crony, and this potentially blocks traffic for BNSF more than for UP.

    Sent from my SM-G981U using Tapatalk

  4. #14

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    There is a long list of failed mergers well beyond just the railroad industry. I've read that *most* mergers do not return their expectations. Look at all the companies google has bought and then shut down.

    Eric is right about Buffet, but also right that negotiations have probably already taken place. Certain industry insiders knew about this for many months (or longer), probably reflecting that activity. Presumably BNSF is part of those previously completed negotiations.

    Christopher

  5. #15
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    It now looks like CN wants to get into the action and start a bidding war.
    BNN Bloomberg Tuesday April 20, 2021
    CN confirmed in a release Tuesday that it presented a proposal to buy KCS for US$325 per share in cash and stock. The news came a short time after The Wall Street Journal reported an offer was in the works.Under the terms of the bid, KCS shareholders would receive US$200 in cash and 1.059 CN shares for each share held and would own 12 per cent of the combined company.The proposal comes almost exactly one month after CP Rail reached a friendly agreement to buy KCS for US$275 per share, including $90 in cash.

    CN said in its release it anticipates upward of US$1 billion in synergies and said the deal will boost earnings per share in the first full year after closing the deal.
    Rory

  6. #16
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    Looks like CN isn't wasting any time, either
    Attached Images Attached Images

  7. #17
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    Ya I don't think Keith Creel is too happy with the way CN just butted right in and offered a sweeter deal.
    Rory

  8. #18

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    From what Creel said to a reporter earlier, CP doesn't have the ability to match the higher offer.

    Pass the popcorn....

  9. #19
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    I'd see CN has having more STB problems than CP, because KCS and CN have a lot of parallelism. So it would be more like a classic merger with duplicate routes to shed/abandon.

    The other problem is that CN is currently a 3-coast railroad (Atlantic, Pacific, Gulf) but nobody else is. Adding KCS gives CN a commanding presence in the Mexican market as well (and we haven't heard about what Mexico's reaction to a KCS merger might be yet, have we?). CP currently has no presence on the Gulf and has to interchange to get Mexican traffic; adding KCS for access to Mexico and the Gulf is less of an issue with them, and arguably increases competition in oil & chemical country with UP and BNSF.

    Bottom line: I think CP+KCS would be marginally easier to sell to STB than CN+KCS, regardless of the money involved. No merger of Class 1's is an easy sell. Some trackage rights might be required for CN, BNSF, and maybe even UP in spots, but for the most part CP+KCS is an end-to-end merger giving CP access to new territory, rather than a duplicate-routes merger that simply leads to cost and capacity reduction.

  10. #20
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    Quote Originally Posted by tie View Post
    Ya I don't think Keith Creel is too happy with the way CN just butted right in and offered a sweeter deal.
    Agree. However, for the KCS stockholders, the CP deal might still be better in one respect: the CP offer is mostly stock, with only a little cash; CN is the other way around. All that cash has tax consequences: the more of the deal that's stock, the less of it is an immediate taxable event. So it's not as simple as looking at the gross amount offered - individual stockholder considerations could be important.

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