Kansas City Southern in talks on Canadian Pacific's $31B bid

Kansas City Southern is in talks with Canadian Pacific to determine whether its $31 billion bid is the best offer on the table after regulators rejected a key part of Canadian National’s $33.6 billion offer last week

OMAHA, Neb. -- Kansas City Southern is in talks with Canadian Pacific to determine whether its $31 billion bid is the best offer on the table after regulators rejected a key part of Canadian National's $33.6 billion offer last week. Kansas City Southern said Saturday that its board believes CP's lower offer could be the better deal because the Surface Transportation Board said that Canadian National won't be able to use a voting trust to acquire Kansas City Southern and hold the railroad during the board's lengthy review of the overall deal. In contrast, regulators have already OK'd Canadian Pacific's use of a voting trust because there are fewer competitive concerns about combining Canadian Pacific and Kansas City Southern. So there is a clearer path forward for the CP-KCS deal although it would still face a detailed review from the Surface Transportation Board, and it would be the first major railroad merger since the 1990s. Canadian Pacific and Kanas City Southern have all week to work out their differences, but CP has put a Sept. 12 deadline on its latest offer, so it's not yet clear whether the two railroads will be able to rebuild the merger offer they first announced in March before Canadian National intervened. Both Canadian bids for Kansas City Southern include a mix of cash and stock and the assumption of about $3.8 billion in KCS debt.