KANSAS CITY, MISSOURI, US — The board of directors of Kansas City Southern (KCS) on Aug. 12 said that the unsolicited proposal received from Canadian Pacific Railway Ltd. on Aug. 10 to acquire KCS in a cash and stock transaction does not constitute a “company superior proposal” to the railway’s deal already on the table with Canadian National Railway (CN).

As a result, the KCS board reaffirmed its recommendation to KCS shareholders to vote in favor of the pro-competitive, end-to-end merger with CN. The Surface Transportation Board (STB) is currently reviewing the joint voting trust application put forth by CN and KCS, with a final decision expected to come no later than Aug. 31. 

“KCS and CN are confident that the voting trust meets all the standards and the public interest test set forth by the STB and believe that it should be approved,” the companies said. “KCS shareholders will receive the merger consideration immediately upon the closing of the voting trust, which is also subject to receipt of KCS shareholder approval and Mexican regulatory approvals.”

KCS and CN entered into a definitive merger agreement in mid-May under which CN agreed to acquire KCS in a stock and cash transaction valued at $32.51 per common share, implying a total enterprise value of $33.6 billion, including the assumption of approximately $3.8 billion of KCS debt. Under the terms of the agreement with CN, KCS shareholders will receive $200 in cash and 1.129 shares of CN common stock for each KCS common share.

“We are pleased that the KCS board of directors has reiterated that the agreed transaction with CN is superior and recommends that stockholders vote for our pro-competitive combination,” said JJ Ruest, president and chief executive officer of CN. “CN and KCS are committed to moving forward to create the premier railway for the 21st century. Together, we will enhance competition, drive economic growth and realize the benefits of a fully end-to-end transportation network connecting North America. We look forward to continuing to work with KCS to deliver this compelling combination to both companies’ stakeholders.”

The decision by the KCS board to stick with CN’s proposal comes just a few days after CP said it wasn’t giving up on what it calls a “once-in-a-lifetime partnership.” The Calgary, Alberta, Canada-based railway on Aug. 10 submitted what it considered to be “a superior proposal” to acquire KCS in a stock and cash transaction representing an enterprise value of approximately $31 billion.

The three railways have been going back and forth since mid-March, when CP first announced it had agreed to purchase KCS in a transaction valued at $29 billion.