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Canadian Pacific Railway Limited (TSX:CP) and Canadian National Railway (TSX:CNR) are in the midst of an epic bidding war over the acquisition of transportation company Kansas City Southern (KSU:US or NYSE: KSU).
The clash reached a new level on Tuesday, April 20, after CN Rail made a ‘superior’ offer to purchase KSU for US$ 325 per common share in cash and stock, representing a 21 per cent premium over CP Rail’s offer.
On the back of this development, CN Rail stocks fell by more than seven per cent on Tuesday morning, while CP Rail shares dwindled by 1.5 per cent (11:33AM EST).
Meanwhile, stocks of KSU soared by almost 16 per cent to US$ 297.24 apiece on the New York Stock Exchange (NYSE).
Image Source: Pixabay
CP Rail had announced on March 21 that it is buying Kansas City Southern for US$ 29 billion, which included US$ 3.8 million in debt. Following this acquisition, Canadian Pacific planned to create a rail network linking the US, Mexico and Canada.
CP Rail had proposed a 23 per cent premium on KSU’s close price of US$ 275 on March 19, 2021.
Topping that bid, CN Rail is now offering to pay US$ 33.7 billion to KSU, up by US$ 4.7 billion against its rival’s proposal. The company expects its earnings per share to increase in a year after completing this transaction.
Let us glance at the market fundamentals of both these Canadian railway stocks.
Canadian National Railway Co (TSX:CNR)
CNR stock gained 32.44 per cent in one year, overtaking the S&P/TSX Railroads (Sub Industry) Index, which has declined by 3.42 per cent in comparison.
The transport stock is up by about six per cent year-to-date (YTD).
CNR has a current market cap of C$ 99.1 billion, while CP Rail’s market cap stands at C$ 60.1 billion, as per TMX.
Canadian Pacific Railway Limited (TSX:CP)
CP Rail’s stock swelled by nearly 46 per cent over the past year, outperforming its rival CNR. The stock is up three per cent this year, with its earnings per share standing at C$ 18.05.
CP stock delivers a 32.95 per cent return on equity (RoE), as against CNR’s RoE of 18.34 per cent.