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UPDATE 3-Markets cheer as Kansas City puts off shareholder meet after deal setback

reuters.com · 09/01/2021 08:28
UPDATE 3-Markets cheer as Kansas City puts off shareholder meet after deal setback

No new date for Kansas City investor meet

Canadian Pacific chief warns on $27 bln rival offer

Shares of bidders, Kansas City rise

Recasts with comments, adds link to Breakingviews, timeline, updates share movement

By Abhijith Ganapavaram

- Kansas City Southern KSU on Wednesday pushed back a vote on its proposed $29 billion sale to Canadian National Railway CNI as financial investors bet a decision by the U.S. regulator had derailed the deal.

The other suitor for the U.S. railroad, Canadian Pacific Railway Ltd CP, said it would not be as willing to stick to its own $300 per share offer, worth $27 billion, after a Sept. 12 deadline. nL4N2Q331Y

Giving no timeline for a new shareholders' vote, Kansas City said it would evaluate the smaller offer again, while saying it was looking at other options to complete the deal with Canadian National.

Shares in both the Canadian companies rose around 5% on bets that Canadian National may not complete a costly merger, while others said Canadian Pacific (CP) could profit from stepping in to buy the U.S. railroad at a cheaper price.

"It's probably going to be good news if they (CP) can win this deal," said Gregory Taylor, a portfolio manager at Purpose Investments.

Canadian National and its smaller rival have been vying to buy Kansas City for months, seeking to create the first direct railway linking Canada, the United States and Mexico.

The U.S. Surface Transportation Board on Tuesday rejected a voting trust structure that would have allowed Canadian National's deal to proceed on antitrust concerns.

Chairman of the House Committee on Transportation and Infrastructure Peter DeFazio on Wednesday backed the regulator's ruling. nL4N2Q23VE

The rail regulator has already cleared Canadian Pacific's voting trust to buy Kansas City.

Meanwhile, Canadian National said it was also evaluating options. The company and Kansas City can seek a full approval, but regulatory experts said the process would be uncertain and could last more than a year. nBwb6Q7L9a

Kansas City's shares were up 3.6%. They fell 4.4% on Tuesday after the regulator's ruling.

BREAKINGVIEWS-Railroad suitor's graceful exit depends on rival - Reuters NewsnL1N2Q3134

TIMELINE-The unfolding of the Kansas City Southern takeover saga - Reuters NewsnL4N2N12Q2

(Reporting by Abhijith Ganapavaram in Bengaluru, additional reporting by Amal S; Editing by Ramakrishnan M., Shailesh Kuber and Arun Koyyur)