Canadian Pacific Railway Limited (CP) said it is ready to re-engage with the Kansas City Board of Directors following its determination that CP's revised offer can reasonably be expected to lead to a "Company Superior Proposal."

"We look forward to re-engaging with the KCS Board of Directors to advance this unique and achievable Class 1 combination that provides compelling short- and long-term value," said Keith Creel, CP President and CEO.

"CP-KCS is the only truly end-to-end Class 1 merger that preserves and enhances competition. It is the perfect combination and we are ready to go to work to unlock this unique opportunity, creating something special for the rail industry and for commerce in North America," he added.

CP this week reaffirmed its offer originally submitted August 10 and resubmitted August 31 to combine with KCS, which recognizes the premium value of KCS while providing regulatory certainty.

September 12 deadline for KCS offer

CP said in a statement that it believes it ought to be deemed a superior proposal and has placed a deadline of September 12 on that offer. 

The proposed transaction values KCS at US$300 per share, representing a 34% premium, based on the CP closing price on August 9, 2021 and KCS unaffected closing price on March 19, 2021.

Following the closing into a voting trust, common shareholders of KCS will receive 2.884 CP common shares and US$90 in cash for each share of KCS common stock held.

The proposed transaction also includes the assumption of US$3.8 billion of outstanding KCS debt.

STB rejects CN-KCS voting trust application

On August 31, the Surface Transportation Board (STB) unanimously rejected CN and KCS's joint motion for approval for use of a voting trust.

CN noted that this decision "clearly shows that the CN-KCS merger proposal is illusory and not achievable."

It added that in comparison, the STB has already approved CP's use of a voting trust and affirmed CP-KCS's waiver from the new rail merger rules it adopted in 2001 because a CP-KCS combination is truly "end-to-end, and pro-competitive."