By Justin Franz 

KANSAS CITY — Last week during an industry conference in Chicago, Canadian Pacific President and CEO Keith Creel likened his company’s relationship with Kansas City Southern to a country-western song, where two partners got together, broke up, and ultimately made up. On Sunday, that analogy proved true. 

KCS announced Sunday morning that its board had determined that CP’s offer to merge was “superior” to one by Canadian National. CN has five days to sweeten its offer to KCS, although, considering the regulatory hurdles a CN-KCS merger would have to get over, it seems unlikely CN would succeed. If CN cannot convince the KCS board otherwise, the merger agreement between those two roads would be terminated and the CP-KCS deal would move forward. 

CP and KCS announced back in March that they planned to merge, but a few weeks later CN muscled its way into the deal and offered more money. For months it appeared that CN and KCS would merge until August when the U.S. Surface Transportation Board torpedoed a proposal by CN to put KCS into an independent trust pending review. The rejection of that provision ultimately sunk the deal and KCS went back to CP, which had sweetened its earlier deal. 

CP officials were excited about the prospect of a deal with KCS. 

“We are pleased to reach this important milestone and again pursue this once-in-a-lifetime partnership,” Creel said. “As we have said throughout this process, CP remains committed to everything this opportunity presents. This merger proposal provides KCS stockholders greater regulatory and value certainty. We are excited to move forward as we work toward making this perfect match a reality.”

The deal will still need to be approved by KCS shareholders and the STB, a process expected to take months. However, the STB has indicated that a CP-KCS merger will have fewer hurdles to climb than a much larger CN-KCS merger.