Canadian Pacific Declines to Increase Offer for Kansas City Southern

Canadian Pacific Railway Ltd. said Thursday it won’t increase its takeover offer for Kansas City Southern , betting recent setbacks for a higher offer from a rival make sweetening the bid unnecessary.

It is now up to Kansas City Southern to decide whether to go with a roughly $30 billion offer from Canadian National Railway Co. and abandon a $25 billion deal it already agreed to with Canadian Pacific . While Canadian Pacific has already received a key early nod from the Surface Transportation Board, the panel, which regulates railroads in the U.S., indicated this week that it needs more details before ruling on Canadian National’s offer.

Canadian Pacific had until later Thursday to alter its bid or hold steady after Canadian National took the lead in the race to acquire Kansas City Southern last week, when the U.S. railroad declared the higher bid was likely to lead to a better deal.

That declaration came after Canadian National agreed last week to add more stock to its proposal and cover the $700 million breakup fee Kansas City Southern would owe Canadian Pacific for walking away from their existing merger agreement.

Either deal would involve a two-step process. First, a voting trust would acquire Kansas City Southern shares and, assuming necessary approvals are received, whichever companies would then merge. Both the use of a trust and the merger itself need approval from the STB, which requires major railroad combinations to be in the public interest and enhance competition.