North America - Touting its US$29 billion offer for KCS, CP called the larger bid from CN "fool's gold" because it will never win regulatory approval.
 
CP CEO Keith Creel dedicated the first 25 minutes of the company's conference call to issues he perceives with the unsolicited US$33.7 billion cash-and-stock offer from CN, Bloomberg reports.
 
"It's fantasy money," Creel said, calling CN's higher-value offer "not achievable."
 
Canada's two largest railroads, and fierce competitors, both hope to take advantage of the United States-Mexico-Canada Agreement, a trade pact that's coming online, and link their railway systems to the U.S. and Mexico.
 
CP's tracks stop at Kansas City, whereas CN has access to New Orleans in the Gulf of Mexico.
 
KCS is appealing because its line runs from the Pacific coast into the U.S., in addition to the advantages of Kansas City's geography and the region's burgeoning intermodal infrastructure.
 
In March, KCS agreed to sell to CP for US$90 and 0.489 share of CP stock for each KCS share.
 
CN's bid, which also would include the assumption of $3.8 billion in debt, offers US$200 in cash and 1.059 shares of CN stock for each KCS share.
 
CN also has vowed to make Kansas City the headquarters of the combined company's U.S. and Mexico operations, and it has promised to retain the KCS name.
 
One key to the competing bids is which would be subject to less stringent review by the U.S. Surface Transportation Board (STB).
 
KCS and CP have asked the board to review the deal using the laxer standard, the board granted KCS a waiver from stricter assessment as the smallest Class I railroad.
 
CN's size would make it much more likely that the board would review its bid under the stricter rules.
 
If KCS were to pursue the CN bid and the STB killed the deal, KCS could be left stranded at the altar.
 
Author unknown.