Kansas City Missouri USA - The scuffle between CP and CN to acquire Kansas City Southern (KCS) requires comment.
 
In the 2021 Railroad Financial Desk Book, it was noted that KCS's franchise value was above the US$208 per share offered by Blackstone, and that the July 2020 rejection of the Blackstone offer by the KCS management team was financially astute and in the interest of shareholders.
 
After CN's most recent offer, KCS's stock is now valued at US$325 per share.
 
(In March 2020, the stock traded at US$108 a share.)
 
CN or CP will be able to wade through the regulatory swamp and close this transaction.
 
(STB has already blessed CP's strategy.)
 
There will be concessions to the other Class I's to approve the acquisition (CN more than CP), but the deal will get done.
 
The deal has enough worthwhile benefits, moving traffic north to south while bypassing Chicago, the opportunity to exploit near-shoring with south to north traffic, and the possible creation of a crude by rail pipeline for Canadian crude.
 
Unfortunately for CP's Keith Creel, unless he matches or improves upon CN's offer, he will have made the same mistake as Blackstone (but with more serious consequences).
 
In a frothy market, never risk embarrassment resulting from pride or cleverness.
 
When making a play for a stock going from US$108 to US$275 in 13 months, commit to being the winner.
 
Speaking of winners, kudos again to Pat Ottensmeyer and team KCS for its "West Coast Cool" approach in letting the market come to them.
 
Results?
 
A 56 percent increase over the Blackstone bid (200 percent increase since March 2020).
 
David Nahass.