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CN Rail tops CP Rail's Kansas City Southern bid by US$5 billion

THE Canadian National Railway (CN) made a surprise offer of US$30 billion topping its rival the Canadian Pacific Railway's (CP) offer to buy the Kansas City Southern Railway for $25 billion, reports Bloomberg

21 April 2021 - 19:00
THE Canadian National Railway (CN) made a surprise offer of US$30 billion topping its rival the Canadian Pacific Railway's (CP) offer to buy the Kansas City Southern Railway for $25 billion, reports Bloomberg.

CN Rail tops CP Rail's Kansas City Southern bid by US$5 billion

THE Canadian National Railway (CN) made a surprise offer of US$30 billion topping its rival the Canadian Pacific Railway's (CP) offer to buy the Kansas City Southern Railway for $25 billion, reports Bloomberg.



Canada's two biggest railways are vying for a rail network that links their country with the US and Mexico as a reworked trade alliance gets underway and the economic recovery from the Covid crisis gathers steam.



Kansas City Southern's sprawling system connects farms in the US Midwest to ports along the Gulf of Mexico. It also reaches deep into Mexico, which made up almost half of the Kansas City, Missouri-based company's revenue last year.



'Railroads don't come up for sale very often,' said CN chief executive CEO Jean-Jacques Rust. 'Our vision has been for a long time to create a very solid north-south network.'



CN estimated that there's a pool of about $8 billion of annual truck freight that it could convert to rail and projected that a deal would add to earnings in its first full year. Profit could increase more than 10 per cent when efficiency gains kick in, CN said.



The combination would create a 'railroad that can really rival with trucks,' said Mr Ruest said. 'A lot of the freight today that moves north-south is only getting a partial ride by rail or is actually moving all truck, and these are huge distances.'



Said Little Rock's Stephens Research analyst Justin Long: 'We think Canadian National understood the competitive challenges this deal could present, given the much broader geographic reach of the pro forma CP network. The Canadian railway face-off has begun.'



Whoever doesn't win Kansas City Southern would face a competitive disadvantage, making a bidding war likely, said Citigroup analyst Christian Wetherbee.

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In-shoring to play limited role, says Singapore tansport minister

PLANS to replace off-shoring of supply chains with in-shoring will not be possible to any significant degrees, says Singapore Transport Minister Ong Ye Kung, reported Colchester's Seatrade Maritime News.



Speaking at the 15th Singapore Maritime Week, Mr Ong said: 'It is not possible to unwind globalisation and the complex supply networks that have been set in place.



'For example, Apple relies on a network of manufacturers from almost 50 countries to produce an iPhone, while Pfizer needs over 5,000 suppliers to manufacture its vaccines,' he said.



The disruption in the supply chain by Covid-19 and the blockage of the Suez Canal have driven talk of in-shoring, but Singapore believes possibilities along this line are limited.



'To prepare for future disruptions, there have been talks of in-shoring, to reduce the reliance on foreign supplies, focus more on 'just-in-case' and less on just-in-time,' Mr Ong said.



But the scope for such changes would be limited, he said. 'I think countries can do this, but probably only at the margins,' he said.



'Ensuring the safety and openness of international trade arteries like the Straits of Malacca and Singapore therefore remains a critical task, and requires the collective effort of all stakeholder countries,' he said.



'Because of this, the Maritime Port Authority (MPA) of Singapore will continue to enhance its Vessel Traffic Information System (VTIS) to ensure safety of navigation, including early detection of collision and grounding risks.' said Mr Ong.



'We believe it's likely that CP remains engaged and may try to come back with a higher bid,' he said in a note to clients. 'This clearly would stretch valuation but could be justified by the long-term growth potential of the combined entity.'






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