Photo: Contributed

CALGARY — The CEO of Canadian National Railway Co. says his company’s bid for Kansas City Southern will create a combined “safer, faster, cleaner and stronger railway” than the one proposed by rival Canadian Pacific Railway Ltd.

On Tuesday, the Montreal-based railway announced a cash-and-stock bid valued at US$33.7 billion for Kansas City-based KCS, topping one made last month by Calgary-based CP Rail valued at US$25 billion.

“CN’s proposal represents a 21 per cent premium to CP’s offer and more than double the cash per share, resulting in not just a greater value but also greater certainty of value for KCS shareholders,” said CN chief executive Jean-Jacques Ruest on a conference call to discuss the proposal.

“Our superior access to the capital market, stronger balance sheet, lower cost of financing and ability to realize superior and higher-quality synergies allow us to make a more attractive offer to KCS shareholders.”

Kansas City Southern confirmed in a statement it has received the “unsolicited proposal” from CN and will evaluate it and respond “in due course.”

In a news release late Tuesday afternoon, CP said CN’s bid is “massively complex and likely to fail” because it would create the third-largest Class 1 railroad in North America, thus throwing off the rail industry’s competitive balance and falling short with regulators.

“The only combination involving KCS that is clearly in the public interest is the one that Canadian Pacific has proposed, which has already garnered support from over 400 shippers and other stakeholders,” it said.

“While remaining the smallest of the six U.S. Class 1 railroads by revenue, a combination between CP and KCS creates stronger single-line competition against existing Class 1 routes.”

CN is offering US$200 in cash and 1.059 shares of CN common stock for each KC common share. The proposal was worth about US$310 per share based on Tuesday’s closing share price for CN of C$138.85, down $9.31 on the day, in Toronto.

The CP Rail deal offers 0.489 of a CP share and US$90 in cash for each KCS common share for a value of nearly US$264 per share, based on CP’s closing share price of C$447.71, down $10.19.