Kansas City Southern, which posted flat revenue and sagging profit even as the wider railroad sector shows glimmers of a turnaround, warned of risks to the U.S. and Mexican economies if negotiations about a cross-border trade deal aren’t handled carefully....The company, which operates a railroad between the two countries, has seen its stock battered since President Donald Trump’s election, over the prospects of a renegotiated North American Free Trade Agreement that could hurt its business.While at this time and regardless of who has the tenancy at 1600, the domestic energy industry is starting to recover. The Sheiks have come to their senses regarding a ruinous price war that no one would win. While rail's role in handling oil will be reduced, it will not be extinct.
Gilbert B Norman wrote:There was a short article in Saturday's Journal that presented a "not so optimistic" outlook for KCS.Could this be a good opportunity for the CP to work a deal to merge with KCS?
A group of big buyout investors is considering a takeover bid for railroad operator Kansas City Southern that could be worth more than $21 billion and mark a big bet on U.S.-Mexico trade.Not sure what's behind this possible "bet", but a guess, and a SWAG at that, is improved trade relations between Mexico and an incoming Administration.
Blackstone Group Inc.’s infrastructure arm and Global Infrastructure Partners are together exploring a potential deal and speaking to banks including Citigroup Inc. about financing, according to people familiar with the matter.
KANSAS CITY — Two private equity firms are speaking to banks about financing a takeover of Kansas City Southern in a deal that would be worth more than $21 billion, the Wall Street Journal reported late Friday. The deal would involve Blackstone Group Inc. and Global Infrastructure Partners and financing from CitiBank, according to anonymous sources. Kansas City Southern declined to comment on the story.
Although details were limited, KCS stock jumped 14 percent late Friday, from $153.72 to $182.44 in just 15 minutes. It slid down to about $177 at the end of trading. The story noted, however, that it was unclear if the private equity firms would actually go through with a deal or if the railroad would even be open to it.
The Wall Street Journal reported that “If there is a deal, it would be significant. Kansas City Southern had a market value of roughly $14 billion Friday afternoon [July 31] and including debt, the value of a bid could exceed $21 billion. The bid being discussed would likely include about $6.5 billion worth of debt financing.”
Although KCS is the smallest of North America’s seven Class One railroads, it is the only one with a significant presence in Mexico, making it a particularly fruitful target for investors or other railroads.
Do Railroad Takeovers Only Happen in Crises?
(Bloomberg Opinion) -- The time may finally be right for another big railroad deal. All it took was another economic downdraft. Private equity firms Blackstone Group Inc. and Global Infrastructure Partners are reportedly weighing a joint bid for Kansas City Southern that would value the railroad at about $21 billion including debt. ...
It’s notable that railroads may be included in this latest deal frenzy. There hasn’t been a major takeover of a North American railroad since Warren Buffett’s Berkshire Hathaway Inc. struck a $36 billion deal for Burlington Northern Santa Fe in 2009. There were attempts by Canadian Pacific Railway Ltd. under the leadership of legendary railroader Hunter Harrison to seek a merger first with CSX Corp in 2014 and then Norfolk Southern Corp. in 2015, but the carrier was rebuffed each time amid antitrust concerns. The failed talks showed the hurdles for any merger between the largest North American train operators after a wave of dealmaking in the late 1990s consolidated the industry into effectively seven main players, of which Kansas City Southern is the smallest and one of the few with major infrastructure in Mexico. As Buffett proved, though, a private investor is a different story.
This makes any transaction more of a bet on the future of trade between the U.S. and Mexico and a push to relocate manufacturing away from China. It’s a decent wager given the recent resurgence of interest among U.S. industrial companies to consider factories a bit closer to home.That's "the play" KCS's value rests upon.
A group of buyout investors has made a takeover offer for railroad operator Kansas City Southern, which has a market value of more than $18 billion, according to people familiar with the matter.Now here's the quote I find most intriguing:
Blackstone Group Inc. and Global Infrastructure Partners submitted the bid after a previous approach was rebuffed, the people said. It is unclear whether Kansas City Southern will be receptive this time and details of the offer couldn’t be learned.
Analysts at investment bank Cowen Inc. said in a note last month that a deal involving a private-equity buyer would likely receive less scrutiny from the Surface Transportation Board—the independent federal agency that reviews railroad mergers—than a proposed combination of two operators. Still, they noted that several railroad operators including Canadian Pacific Railway Ltd., Canadian National Railway Co. and Berkshire Hathaway Inc.’s BNSF Railway Co. could be logical suitors.From both the operator and shipper viewpoints, a CP-KCS combination has its "sell". Since the CP already has an interchange with KCS at Kansas City (my MILW), they would have Chicago access.
Two investment groups have made a new offer to buy Kansas City Southern after a previous bid was rebuffed, the Wall Street Journal reports in a paywalled article. Details of the bid by Blackstone Group Inc. and Global Infrastructure Partners were not available, the Journal said, and it was unclear whether KCS will be receptive to the offer. The railroad, the smallest of the seven Class I railroads that operate in the U.S., has a market value of more than $18 billion.