Shares of Canadian Pacific Railway Ltd. rose on Sunday as shareholders of rival U.S. railroad Kansas City Southern took a minority position in a share offer from the Canadian railway company.
Canadian Pacific needs support from two-thirds of the new American shares in Kansas City Southern in order to proceed with its $8.44 billion offer.
Shareholders of Chicago-based Kansas City Southern on Sunday approved the proposal and valued their stock at $163.5 million, which Canadian Pacific deemed inadequate for a deal. The shares rose almost 5 percent in premarket trading.
Canadian Pacific has offered $72.50 per share of Kansas City Southern, which gave the Canadian railway company a 75 percent premium to the target’s Friday closing price of $65.38. The cash part of the offer valued Kansas City Southern at $54.92 per share. Canadian Pacific said it would provide Kansas City Southern with a financing commitment to provide the delivery of the offer, payable in Canadian and U.S. dollars.
“We believe this new financing commitment demonstrates the strong confidence the Canadian Pacific board and management team has in our strategic case for Kansas City Southern,” Canadian Pacific chief executive Hunter Harrison said in a statement.