timmie
Junior Member
Posts: 57 
|
Post by timmie on Apr 20, 2021 8:51:35 GMT -8
What's everyone's take on this?
CN just submitted their own offer to KCS for 33B. Seems to me CN doesn't want any serious competition in the north south corridor. If this deal is considered and accepted by KCS, I can see it being shot down for the simple reason CN already has a direct north south corridor and this would create a monopoly in that corridor.
CN has enjoyed being the only railroad that can offer true coast to coast and Canada to the Gulf service, and they don't want to share any of that traffic with their Canadian competitor.
I see it as a low and sleazy attempt to block CP from expansion.
|
|
|
|
Post by jonklein611 on Apr 20, 2021 9:23:21 GMT -8
Two counter points:
1. Monopolies are not illegal, only the abuse of said monopoly is illegal
2. It seems like CN thinks that CP is underbidding, and offered more money. CP can always counter bid.
Yes CN has a direct N/S route, but doesn't include access to Mexico. I think that's the key takeaway. The Mexico routing is huge and neither railroad currently has access.
|
|
|
|
Post by edwardsutorik on Apr 20, 2021 11:15:37 GMT -8
Yes CN has a direct N/S route, but doesn't include access to Mexico. I think that's the key takeaway. The Mexico routing is huge and neither railroad currently has access. I'm of the impression that all North American railroads interchange. Thus CN and CP would have a route for their freight to "anywhere" in Mexico. And presumably take advantage of that. Currently, they don't OWN a Mexican segment of a route. Whether owning is advantageous is interesting. The railroad becomes bigger and longer. It will make the profit for the Mexican operation that someone else is getting now. And it will get the expenses. Ed |
|
|
|
Post by kmaster on Apr 21, 2021 9:30:04 GMT -8
my take: KCS isnt worth this amount of cash
|
|
|
|
Post by jonklein611 on Apr 21, 2021 11:24:04 GMT -8
my take: KCS isnt worth this amount of cash Current market cap is 27.23B USD, so the offer would have be in excess of that to get the investors to bite. |
|
|
|
Post by kmaster on Apr 22, 2021 8:19:56 GMT -8
true, i have a feeling its gonna be a bidding war, CP is gonna go 35B, CN will respond with 40B, then CP will offer something smaller (41B-42.5B) then it will slowly creep up and settle between 45-50B.
|
|
|
|
Post by edwardsutorik on Apr 22, 2021 8:38:00 GMT -8
KCS annual income averages 2.7B. Less operating expenses, it is about 1B, before taxes and interest on debt. Is it worth 47B? Can one of the Canadian roads do something to increase that 1B income? What?
Ed
|
|
|
|
Post by kmaster on Apr 22, 2021 8:42:13 GMT -8
Well yes and no, the reason the Canadian roads want it is so they can get across the continent. It isnt about how good the road is doing, just how important it is for their infrastructure. If it wasnt very important for a Canadian road, CN wouldnt have out bid CP
|
|
timmie
Junior Member
Posts: 57
|
Post by timmie on Apr 22, 2021 15:41:29 GMT -8
If CN really wanted KCS for access to Mexico, they would have made this attempt at take-over years ago. The only reason they made the offer is they don't want the competition. Yes, KCS presently competes with CN in the N-S corridor but let's face it... KCS isn't a real serious competitor, but merge them with CP and that's a much different story. CP could potentially pull a lot of business off CN's tracks.
This type of business is par for the course for CN, and has been for years.
Look waayyy back to 1985.. CN and CP, but mainly CN, fought tooth and nail no keep a 3rd railroad out of southern Ontario by shady deals on the CASO sale. Then let a world class railroad die a slow death.
Seek out the competition, and eliminate it. CN is attempting that here too.
Hopefully the STB sees this and puts the kibosh on it.
|
|
|
|
Post by edwardsutorik on Apr 23, 2021 11:28:23 GMT -8
Well yes and no, the reason the Canadian roads want it is so they can get across the continent. It isnt about how good the road is doing, just how important it is for their infrastructure. If it wasnt very important for a Canadian road, CN wouldnt have out bid CP Freight can get from Canada to Mexico RIGHT NOW. And the other direction, too. You guys are acting like Canadian freight gets turned back at the border, and if KCS is purchased, the freight will be able to flow south. It already does. The difference between before and after such an acquisition is that CN or CP will own and control an additional segment of the route their freight will take. So they will get the profit that KCS presently gets. And they will get the expenses that KCS presently gets. And they will get to deal with the Mexican government, however that goes. The Canadian road that wins the bidding will be spending maybe 47B to get KCS. The value to that railroad is the money they can get back out should they re-sell KCS, plus the net profits. Hence the numbers I posted. If they DON'T sell it, they just spent 47B to get an annual income of something less than 1B (taxes, you know). That IS a pre-tax 2% return, which may or may not be impressive. Ed |
|
|
|
Post by kmaster on Apr 29, 2021 3:54:44 GMT -8
Yes, thats what i mean, they are in it for the extra profits of mexico-canada freight.
|
|
|
|
Post by fr8kar on May 13, 2021 17:29:18 GMT -8
|
|
|
|
Post by gevohogger on May 13, 2021 17:40:54 GMT -8
Maybe eventually KCS will take the CP locomotive picture off their website homepage?
And replace it with a CN obviously....
|
|
|
|
Post by bnsf971 on May 14, 2021 2:12:15 GMT -8
Maybe eventually KCS will take the CP locomotive picture off their website homepage? And replace it with a CN obviously.... Maybe that's why CN is trying to buy them... |
|
timmie
Junior Member
Posts: 57
|
Post by timmie on May 14, 2021 3:13:14 GMT -8
KCS shareholders may see dollar signs and have said "yes" to CN But I'll bet the STB will say a big loud NO to KCS+CN |
|
