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KSU Not Tempted by CP's Revised Proposal, Sticks to CNI Offer

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Per the latest update on its takeover issue, Kansas City Southern rejected the revised offer by Canadian Pacific Railway Limited (CP - Free Report) . The Kansas City, MO-based railroad operator’s board gave a thumbs down to Canadian Pacific’s renewed $31-billion offer (including the assumption of $3.8-billion outstanding debt of Kansas City Southern).

The board members announced a unanimous decision after closely evaluating Canadian Pacific’s reworked proposal, which was submitted on Tuesday. According to the new offer, Kansas City Southern was valued at $300 per share compared with $275 per the original bid put forward in March. The same was, however, terminated in May. Simultaneously, Kansas City Southern accepted the $33.6-billion acquisition offer made by another Canadian railroad operator Canadian National Railway Company (CNI - Free Report) .

Apart from turning down Canadian Pacific’s improved offer, management at Kansas City Southern announced that the company continues to adhere to its May decision whereby it accepted the Canadian National offer. The same is currently being reviewed by the U.S. Surface Transportation Board (STB). We remind investors that the STB intends to give its verdict on Canadian National’s proposal to form a voting trust by Aug 31. Both parties involved in the prospective transaction are confident of getting a favorable decision from the STB regarding the voting trust.

Even though shareholders of Kansas City Southern are supposed to vote for or against Canadian National’s offer on Aug 19, the company stated that it will adjourn the meeting if the STB fails to announce its decision by Aug 17. If the meeting, currently scheduled for Aug 19, gets delayed, a new date will be assigned by the board of directors. This decision to postpone the meeting is aimed at buying time for its shareholders to reconsider STB’s decision.

Watch this space for more news on the topical issue in the railroad space.

Zacks Rank & Key Pick

Kansas City Southern like Canadian Pacific and Canadian National currently carries a Zacks Rank #4 (Sell).

A better-ranked stock in the Zacks  Transportation  sector is  SkyWest  (SKYW - Free Report) , currently sporting a Zacks Rank #1 (Strong Buy). You can see  the complete list of today’s Zacks #1 Rank stocks here.

Shares of SkyWest have gained 33.7% over the past year.

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