Kansas City Southern rejects $33. 6 B bid from Canadian National

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Kansas City Southern rejects $33. 6 B bid from Canadian National

Kansas City Southern Railway is trying to keep its $33.6 billion merger of Canadian National into track by rejecting a competing $31 billion bid from rival Canadian Pacific earlier this week.

The Canadian National Board unanimously endorsed Kansas City Southern's higher offer to reiterate its earlier support for the offer. All CN shareholders are scheduled to vote on Aug. 19 whether they accept KCS offer, but U.S. railroad said it may now delay the vote if the U.S. railroad offers to reject that vote The Surface Transportation Board won't issue its decision on a key part of Canada National's acquisition plan before Tuesday.

The STB said earlier this week that it would issue its decision on the proposed voting trust to use Kansas City Southern and hold the railroad until August 31, with Canadian National doing his long review of the overall deal. Canada Pacific officials said they don't think the CN's deal can get approved. They argue that the acquisition would hurt competition across much of the central United States because those railroads operate parallel railway lines connecting the Gulf Coast to the Midwest. CP officials have also said that CN's plan would add to rail congestion in the Chicago area, and it would likely inspire other railroads to attempt mergers.

Can Canadian National says it can address competitive concerns by selling its operating plan and 70 miles of track between Baton Rouge and New Orleans, Louisiana, where Kansas City Southern's network direct overlaps with the CN tracks. Canadian National said that it would also have connections with other railroads to allow customers to ship goods using a combination of different railways if they choose.

It's not clear how Surface Transportation Board will rule because its current merger rules haven't been tested. The new rules were adopted after a series of service problems left shipments and the industry was left with six huge players in North America after several mergers in the 1990's.

Regulators have said that any deal involving one of the nation's six largest railroads needs to improve competition and serve the public interest in order to get approved. The board has also said it would consider whether any deal would destabilize the industry and prompt additional mergers.