North America - The freight train trip from Canada to Mexico still goes through Kansas City, but the rest of the route remains unsettled.
 
Driving the news: Kansas City Southern (KCS) on Friday canceled its planned US$29 billion merger with Canadian Pacific Railway (CP), instead opting for a US$33.6 billion deal with Canadian National Railway (CN).
 
Why it matters: Either deal would create the only railroad that runs from Canada to Mexico, and comes against the backdrop of increased transcontinental shipping due to post-pandemic reopening and the USMCA trade deal.
 
Details: CN offered US$325 per share, versus US$275 per share from CP.
 
KCS shareholders retain 12.6 percent of the combined company, whereas they would have retained 25 percent under terms of the original agreement.
 
Both offers include the assumption of around US$3.8 billion in debt.
 
KCS has already paid a US$700 million termination fee to CP, which is expected to be reimbursed by CN, per an SEC filing.
 
Not so fast: CP opted against raising its bid, but not because it's given up.
 
Instead, the spurned suitor is biding its time, believing that the new deal will be blocked by U.S. regulators.
 
Its optimism is rooted in a decision last week by the U.S. Surface Transportation Board (STB) to deny CN's request to form a voting trust that would buy and operate KCS while the deal is under regulatory review.
 
CP had been successful in its own voting trust motion, and believes the STB reticence on the current deal is because of some route overlap and competition issues that aren't present in the original merger.
 
That said, STB is taking a second look at CN's offer, now that KCS has actually accepted it.
 
The bottom line: If STB does stop the CN train, CP remains positioned to pick up the route.
 
Author unknown.