​UPDATE: May 21, 2021: Kansas City Southern and Canadian National announced they have entered into a deal that would join the companies' networks just a week after KCS terminated a similar deal with Canadian Pacific, the railroads announced Friday. The agreement would result in CN taking control of KCS.

The deal is not expected to be completed until the second half of 2022 as it still has to be approved by the Surface Transportation Board and other regulators.

"We are confident in our ability to gain the necessary regulatory approvals and complete the combination with KCS," Robert Pace, chair of the board of CN, said in a statement.

UPDATE: May 14, 2021: Kansas City Southern has notified Canadian Pacific that it will terminate its merger agreement after it received an updated proposal from Canadian National, KCS said in a press release Thursday night. CN's offer values KCS at $33.6 billion.

"Together, CN and KCS will seamlessly connect ports and rails in the United States, Mexico and Canada by providing superior service, enhanced competition and new market access to move goods across North America safely and efficiently," CN CEO JJ Ruest said in a statement.

CP and CN had received support for their proposals from hundreds of shippers and other stakeholders. Support for CN came in from the city of Hobart, Indiana, Green Bay Packaging, Real Potatoes and Retail Council of Canada, according to filings with the Surface Transportation Board. While CP had support from Wabtec, Iron Horse Transloading and Omega Industries.

CP referred to CN's offer as an "anti-competitive bid" in a statement on Thursday. "As we've said repeatedly, we are not going to enter into a bidding war," CP said. "Our mutually negotiated agreement with KCS represents compelling short term and long term value for shareholders that is actually achievable."

UPDATE: April 20, 2021: Kansas City Southern confirmed in a letter to investors Tuesday that it had received the proposal — which it referred to as "unsolicited" — from Canadian National. "The KCS board of directors will evaluate CN's proposal in accordance with the terms of KCS' merger agreement with CP, and will respond in due course," the letter said.

Dive Brief:

• Canadian National Railway has placed a bid of $33.7 billion for Kansas City Southern's assets, which CN said it would combine with its own to create a network connecting Canada, Mexico and the U.S., according to a Tuesday announcement.
• "This rail and logistics network would reduce traffic congestion and prevent thousands of tons of greenhouse gas emissions from entering the atmosphere every day," CN said in its press release.
• This comes less than a month after KCS and Canadian Pacific announced a deal. CP had offered $29 billion to acquire KCS. The offer by CN is expected to start a bidding war, according to media reports.

Dive Insight:

CN and CP seem to see similar benefits in the acquisition of KCS' assets: the ability to connect companies across three countries and open markets to shippers and their suppliers.

CP and KCS laid out the argument for combining their companies in a joint conference call last month and on websites that discuss the deal's economic growth potential. They said reducing the number of railroads to compete against each other is actually good for railroad competition.

The two railroads said automakers would benefit from better connections to their suppliers in Mexico and ports in Canada. They said agricultural shippers will be able to reach new markets. And the whole deal, they said, will be good for the environment, an argument they back up with the traditional railroad climate calculus: Rail is more fuel-efficient than trucks.

CP and KCS outlined what they asserted was basically a done deal, just awaiting approval from regulators, which was framed as nothing but a formality.

"To think about the trust not being approved is not something we're considering," CP CEO Keith Creel told analysts last month, saying he thought it was "highly unlikely" that the Surface Transportation Board wouldn't approve the deal.

KCS executives spoke about the deal with CP on the railroad's earnings call Friday, noting the two companies were already working together on the deal.

"We have been granted a protective order by the STB, which allows small group of individuals, executives from both companies, to go into the zone of confidentiality and begin to share information to develop our merger case and our merger application, including network wide operating plans, safety integration, environmental impact and many other things," KCS President and CEO Pat Ottensmeyer said last week.

But with CN stepping in with an offer it claims is "clearly superior to the proposed transaction" with CP, it's not clear what will happen with those discussions.

"We firmly believe our proposal is far superior to KCS' existing agreement with CP because it offers superior financial value over the immediate and long-term, a more complementary strategic fit, greater choice and efficiencies for customers and enhanced benefits for employees and local communities," Chair of the Board for CN Robert Pace said in a statement.