Kansas City Southern is expected to ditch its merger agreement with Canadian Pacific Railway Ltd. in favor of a competing proposal from Canadian National Railway Co., according to people familiar with the matter, a dramatic turn with big implications for the shape of the U.S. rail industry.
The expected move follows a decision earlier Thursday by Canadian Pacific to hold firm on the terms of its already-agreed deal with Kansas City Southern after the U.S. railroad operator indicated it would favor a topping bid by Canadian National. The decision could be unveiled by Friday.
There is no guarantee Kansas City Southern will terminate the Canadian Pacific deal, as it could still change course and stick with it.
Canadian Pacific was betting recent setbacks for Canadian National’s higher offer would make sweetening its deal unnecessary, but the expected development indicates Kansas City Southern views the gap between the two cash-and-stock bids as too substantial to ignore.