North America - Kansas City Southern (KCS) said a proposal by Canadian National Railway Co. (CN) may lead to better terms than an offer by Canadian Pacific Railway Ltd. (CP), potentially escalating a bidding war in one of the industry's biggest potential deals in decades.
 
KCS said Saturday it will begin talks with CN, confirming an earlier Bloomberg News report.
 
The negotiations could yield a "superior proposal" than one reached last month with CP, it said.
 
The U.S. rail operator remains bound by the earlier merger agreement and there's no assurance that talks with the rival bidder would result in a transaction, it added.
 
The two biggest Canadian railroads are battling for ownership of the U.S. company, seeking to extend their rail links not just within the two countries, but also through Mexico to take advantage of a reworked North American trade alliance called the United States-Mexico-Canada Agreement or USMCA.
 
This week, CN offered US$30 billion to snatch KCS, valuing the company at US$325 per share in a cash-and-stock deal.
 
The proposal topped a US$25 billion deal Kansas City reached with CP last month.
 
"This is the right combination to bring the renegotiated USMCA to life in a meaningful way," Robert Pace, chairman of CN, said in a statement Saturday, touting its more than a century of operations in the U.S.
 
Rival CP said on Saturday that it will "fully support" KCS's decision to review the competing offer, adding that the U.S. company will see that the rival bid is "fraught with challenges, uncertainties, and regulatory risks" that aren't present in its current agreement.
 
CP has already won a petition for its proposed tie-up to be exempt from tougher merger rules that the regulator had established in 2001, lowering the burden for winning approval of the deal.
 
The Surface Transportation Board (STB), which is the final authority on rail acquisitions, said it approved the petition in part because the combination would remain the smallest of the large North American railroads, and would "result in the fewest overlapping routes" when compared to a KCS merger with any other large railroad.
 
Earlier in the week, CP Chief Executive Officer Keith Creel called CN's takeover bid "fool's gold," saying it has little chance of U.S. regulatory approval.
 
CN countered Thursday, accusing CP of trying to distract investors with "inaccurate and unfounded assertions."
 
In a letter to KCS CEO Pat Ottensmeyer, it said CP was trying to advance its own interests and deprive investors of the full value of their shares.
 
Yueqi Yang.