KSU Stock: Kansas City Southern surges higher on rival bid

Shares of Kansas City Southern (KSU) surged higher today in the earlier hours of trading. The company has received a $30 billion offer from rival Canadian National Railway (CNI).

According to Bloomberg, the $325 per share bid consists of $200 in cash and 1.059 in CNI stock for each KSU share. The bid comes 20% higher after another company Canadian Pacific Railway bided an enterprise valued of $33.7 billion.

A deal would create North America’s third-largest railroad, meaning the regulatory hurdles for clearance are going to be higher than the $25 billion deal KCS accepted from Canadian Pacific. The latter combination would still be the smallest Class I railroad, interchanging in only one spot. KCS interchanges with Canadian National in Springfield, Illinois and East St. Louis, Missouri.

Lee Klaskow, Bloomberg intelligence transportation analyst

The bidding focuses on a railway network that links U.S., Mexico, and Canada, these ports connect farms, in U.S. Midwest to the Gulf of Mexico. This could create $1 billion in earnings for the company if the deal passes, however, the deal may be scrutinized by regulators of whether to approve the biggest rail merger in two decades.