By Dana Cimilluca and Cara Lombardo 

Canadian National Railway Co. is expected to sweeten its takeover bid for Kansas City Southern, according to people familiar with the matter, as it seeks to outflank a rival and clinch a $30 billion deal for the railway operator.

The new proposal could include an agreement to cover the $700 million breakup fee Kansas City Southern would owe Canadian Pacific Railway Ltd. should it walk away from their existing merger agreement in favor of a deal with Canadian National, the people said. It couldn't be learned what else a new proposal might contain, including any adjustment to the consideration.

The move could pave the way for Kansas City Southern to switch its allegiance to Canadian National, something it has indicated it might do. Kansas City Southern's board is expected to convene soon and could make a decision on the matter then, some of the people said.

Kansas City Southern had asked Canadian National, which put in a bid seeking to wrest the railroad operator from Canadian Pacific last month, to make adjustments to its proposal, the people said.

There's no guarantee Canadian National will submit a revised bid or that Kansas City Southern would deem it superior. Should Canadian National win Kansas City Southern's endorsement, Canadian Pacific would have a five-day period to sweeten its offer or walk away with the breakup fee.

The agreement with Canadian Pacific includes a $1 billion reverse breakup fee, which Canadian Pacific would owe Kansas City Southern if their deal is terminated for reasons including delays tied to regulatory reviews. Canadian National had proposed the same terms and Kansas City Southern has asked for more, but Canadian National is leaning toward holding firm on that aspect of its bid, some of the people said.

(More to come)

Ted Mann contributed to this article.

Write to Dana Cimilluca at dana.cimilluca@wsj.com and Cara Lombardo at cara.lombardo@wsj.com

 

(END) Dow Jones Newswires

May 13, 2021 14:49 ET (18:49 GMT)

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