CP Rail bid superior to CN Rail deal, Kansas City Southern board rules

The board of Kansas City Southern has ruled that a takeover offer from Canadian Pacific Railway Ltd. is a superior proposal to its agreement with Canadian National Railway Co.

As a result, the U.S. railway says it plans to terminate its deal with CN and sign a definitive agreement with CP Rail which has made a proposal valued at about US$31 billion including debt.

CN has five business days to make changes to its offer to win back the support of the KCS board.

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CN’s offer is valued at about US$33.6 billion including debt, but the U.S. Surface Transportation Board dealt it a setback last month when it rejected CN’s plan to use a voting trust to complete the deal, something it approved for CP Rail.

The trust would allow KCS shareholders to be paid before the U.S. regulator completes its review of the proposed takeover.

CP Rail had signed a deal in March to buy KCS, but CN topped that offer and secured support from the KCS board for its proposal in May.