Shares of Kansas City Southern KSU, -0.80% rallied 6.8% in premarket trading Tuesday, after Canadian Pacific Railway Ltd. CP, -1.06% CP, -0.87% confirmed that it has made what it believes is a “superior” buyout bid for the Missouri-based railroad operator. That follows a report in The Wall Street Journal that Canadian Pacific was planning a new higher bid. The bid comes about three months after the companies’ merger agreement was terminated, resulting in a $700 million breakup fee, as Kansas City Southern (KSU) instead entered a merger deal with rival Canadian National Railway Co.’s CNI, +0.14% CNR, +0.32% following Canadian National’s “superior” bid. Under terms of Canadian Pacific’s new bid, KSU shareholders would receive 2.884 CP shares and $90 in cash for each KSU share they own. Based on Monday’s stock closing prices, that values KSU shares at $299.70 each. Meanwhile, the terms of the CN-KSU merger deal would value KSU shares at $314.38 each based on Monday’s closing prices. CP said in a statement that its new bid is “substantially similar” to those in the CN merger agreement, “but offers significantly higher regulatory certainty than the proposed CN merger and significantly higher value than our previously agreed combination.” CN’s stock rose 1.8% premarket and CP shares shed 2.4%, while futures ES00, +0.01% for the S&P 500 SPX, -0.09% were little changed.
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