(Montreal) The tone is rising between the nation’s two largest railroads, now at the center of an aspiring duel for US Railroad Kansas City Southern (KCS).
In a letter to the Board of Directors of the United States Railways Company, the president and CEO of the Canadian National Railways (CN), Jean-Jacques Roest, responded to the Canadian Pacific Railway (CP) by accusing him of distracting investors from “various false and unfounded allegations.”
“CP statements are not intended to benefit KCS shareholders; Instead, they aim to advance CP’s interests and deprive KCS shareholders of the full value of their shares, ”said the letter released on Thursday.
According to Rust, the Calgary-based company failed to recognize the “apparent material superiority” of the Montreal Railroad’s money and equity proposal to KCS shareholders. CN bids are estimated to be worth $ 33.7 billion, or $ 3.25 per share, or $ 50 per share more than CP offers.
KCS’s railroad assets in Mexico have made the carrier an enviable takeover target for a long time. Both Canadian railroads want to have a network that crosses the United States to Mexico.
On Wednesday, without hinting at a potential bid, CP CEO Keith Krell fired several arrows in the direction of his rival. In particular, he had expressed doubts about the realization of the offer presented on Tuesday by the Montreal company, hinting that it would not gain approval from US regulatory authorities due to its negative impact on competition.
Mr Creel has said that consolidating the activities of the CN and the KCS would “destabilize” the balance of the North American railway network that has, to date, resisted the further strengthening of the six largest railways in two decades. This, he added, would put CP at a disadvantage by making it the “redundant player” in the North American market.
On this point, Mr. Roist replied that the requirement for railway regulatory approval of importance was the establishment of a ballot box, and that the two companies were in a similar position in this regard. The voting fund will allow KCS shareholders to receive a full matching payment without having to wait for final approval of the deal by the Surface Transportation Board (STB) – the US regulator that governs road mergers.
“The amalgamation proposed by CN enhances the public good;” It will improve competition and bring significant benefits to customers, communities and employees, “said Mr. Roist.
Since CN got into the dance, financial analysts have questioned whether the CP will raise the stakes as well as looking at the reasons why the Montreal Railroad finally made a bid.
Scotiabank’s Konark Gupta said in an email that CP appeared to continue to believe its proposal remained superior in its current version even though the price was lower than that of its competitor.
“CP seems not interested in raising the stakes, unless KCS is [se range derrière la proposition du CN] Analyst Books.
On the financial side of the National Bank, Cameron Dwerksen stressed that CP’s argument that a merger with US Railroad would not raise competition issues was convincing.
The analyst wrote: “Investors should be looking for customer opinions on the CN proposal as a possible indication of the likelihood that STB will consider a combination with KCS.”
To date, US regulatory authorities have received several hundred letters from railroad agents in support of CP. The CN display should also have support in this area.
CN shares fell on the Toronto Stock Exchange for the third straight session on Thursday. It closed at $ 137.23, down $ 1.36, or about 1%. Alberta Railroad Company shares advanced $ 14.96, or 3.4%, to close at $ 458.96.