Bitcoin price got you worried? Forget the cryptocurrency, here is the new bubble – HT Tech
In this year of financial kookiness around SPACs, Bitcoin price and non-fungible tokens (NFTs), the hottest M&A target is an old-school US railroad that traces its roots to the 1800s. And it’s now at the center of a bidding war. Kansas City Southern rebuffed multiple offers from private equity firms last year before agreeing in March to sell itself to Canadian Pacific Ltd. On Tuesday, rival Canadian National Railway Co. lobbed in an offer of its own. Its $325-a-share stock and cash bid for Kansas City Southern values the railroad at $33.7 billion including the assumption of debt. The proposal is a roughly 20% premium to the implied $275-a-share value of Canadian Pacific’s bid upon its announcement and more than 50% higher than what Blackstone Group Inc. and Global Infrastructure Partners reportedly offered for Kansas City Southern only in September.
Why the frenzy? As the only major carrier with a significant presence deep into Mexico, Kansas City Southern stands to be a prime beneficiary of any North American manufacturing renaissance that results from the supply-chain snarls of the pandemic and elevated trade tensions with China. Canadian Pacific and Canadian National are both eyeing the prospect of a seamless north-south railroad that can compete more effectively with trucks. But in the end, it may come down to this: Absent an overhaul of antitrust rules, Kansas City Southern is the last remaining viable takeover target among large North American railroads. Now that it’s in play, those with the financial and strategic ammunition to make a deal work aren’t about to let the opportunity pass them by.
After a flurry of consolidation among North American carriers in the 1980s and 1990s, regulators adopted tougher rules in 2001 that require merging railroads to prove a transaction is in the public interest and actually enhances competition. The standard is tricky and untested and has thus effectively acted as a brake on dealmaking in the intervening decades. But Kansas City Southern was granted an exemption from the tougher rules because of its relatively smaller size. Analysts speculated that this would make the railroad an immediate takeover target for the deal-hungry industry. It took two decades, but with Kansas City Southern’s board making clear that it’s now interested in selling, Canadian National wasn’t about to sit on its hands.
“The company is now available,” Canadian National CEO Jean-Jacques Ruest said, when asked by analysts on Tuesday why he was making a move now. “We want to partner. It’s not very often that a Class 1 railroad or large property becomes available. We’ve always had a vision of combining the two companies and what it could do for North America, …….