Railroad group Canadian Pacific has agreed to buy Kansas City Southern for $28.9bn including debt in the largest takeover deal this year, people with direct knowledge of the matter said.
The Calgary-based railroad company will pay $275 per share in cash-and-stock to buy the US freight group, the people said. The transaction is expected to be announced on Sunday.
CP’s proposal represents a 23 per cent premium on Kansas City Southern’s closing stock price of $224 at the end of last week. The deal values its equity at $24.9bn before the inclusion of debt.
The board of Kansas City Southern’s board approved the offer on Saturday and the two companies then notified the Surface Transportation Board, the US regulator for freight rail, about the deal, the people added. The acquisition will need to be approved by the STB.
Kansas City Southern’s network runs from the US Midwest to ports on Mexico’s east and west coasts.
The railway sector was hit hard in the early phase of the pandemic because of restrictions imposed by the US government to contain the spread of the coronavirus.
But the industry’s prospects have improved markedly over recent months, as the US accelerated its rollout of vaccines and business activity picked up considerably. Biden’s moves to strengthen US-Mexico trade relations are expected to further boost railway activity.
Shares of Kansas City Southern have more than doubled in the past year.
The US railroad group rejected a takeover bid last September from a Blackstone and Global Infrastructure Partners-led consortium that valued its shares at $21bn.
CP declined to comment. Kansas City Southern did not respond to a request for comment.
This article has been amended to reflect the fact that the Surface Transportation Board has not approved the deal
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