Canadian Pacific has agreed to buy Kansas City Southern for $25bn, in what would the largest deal of the year, according to people with knowledge of the matter.
The Calgary-based railroad company has offered to buy the US freight group for $275 per share in a cash and stock offer.
CP’s proposal represents a 23 per cent premium on Kansas City Southern’s closing stock price on Friday.
Kansas City Southern’s board has approved the bid. The two companies informally informed the Surface Transportation Board, the US regulator, about the deal on Saturday evening, said people informed about the matter. The acquisition will need to be approved by the STB.
The transaction is expected to be announced on Sunday, said the people with knowledge of the matter.
The deal comes as US-Mexico trade is expected to pick up following the victory of Joe Biden in the 2020 US presidential elections against Donald Trump.
Kansas City Southern’s network runs from the US Midwest to ports on Mexico’s east and west coasts.
CP declined to comment.
Kansas City Southern did not respond to a request for comment.
The US company a takeover bid from Global Infrastructure Partners and Blackstone Group last year that valued the US railway group at $21bn.
Shares of Kansas City Southern have more than doubled in the past 12 months.
The railway sector was hit hard in the early phase of the pandemic because of restrictions imposed by the US government to contain the spread of the coronavirus.
But over recent months, the industry’s prospects have improved markedly as the US accelerated its rollout of vaccines and business activity picked up considerably.
Biden’s moves to strengthen US-Mexico trade relations are expected to further boost railway activity.
This article has been amended to reflect the fact that the Surface Transportation Board has not approved the deal