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Canadian National challenges Canadian Pacific with $33.7 billion Kansas City bid

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By Shreyasee Raj

(Reuters) -Canadian National said on Tuesday it had offered to buy Kansas City Southern railroad for about $33.7 billion, and shares of U.S. company soared as investors anticipated a potential bidding war with Canadian Pacific.

Canadian Pacific had agreed a deal to acquire Kansas City Southern for about $25 billion last month. Either combination would create a North American railway spanning the United States, Mexico and Canada as supply chains recover from being disrupted by the COVID-19 pandemic.

The acquisition interest in Kansas City Southern also follows the ratification of the US-Mexico-Canada Agreement last year, that removed the threat of trade tensions which had escalated under former U.S. President Donald Trump.

Kansas City said it would evaluate Canadian National’s offer. If it found it could lead to a better deal, Canadian Pacific will be given the opportunity to raise its bid.

Canadian National’s cash-and-stock offer, worth $325 per share, is at a 26.8% premium to Kansas City Southern’s offer as of Monday’s trading close.

“We are surprised by this move given the healthy valuation Canadian Pacific had already offered to Kansas City Southern shareholders,” Stephens analyst Justin Long wrote in a note to clients.

Kansas City Southern shares rose 15.8% to $297.12, indicating most investors deemed it unlikely the company would stick with Canadian Pacific’s offer.

One investor that took a different view is Chilton Investment Co, which has a less than 1% stake in Kansas City Southern. Citing regulatory hurdles, it said it preferred a deal with Canadian Pacific.

“There’s more overlap with Canadian National deal which makes it harder to get (regulatory) approval. The Surface Transportation Board (STB) doesn’t like overlap,” Chilton CEO Richard Chilton said.

Canadian National CEO Jean-Jacques Ruest said his network and that of Kansas City Southern are “highly complementary networks with limited overlap.” They only run parallel for 65 miles, between Baton Rouge and New Orleans.

Kansas City Southern has domestic and international rail operations in North America, focused on the north-south freight corridor connecting commercial and industrial markets in the central United States with industrial cities in Mexico. Calgary-based Canadian Pacific is Canada’s No. 2 railroad operator, behind Canadian National.

The STB updated its merger regulations in 2001 to introduce a requirement that Class I railways have to show a deal is in the public interest. Yet it provided an exemption to Kansas City Southern given its small size, potentially limiting the scrutiny that its acquisition will be subjected to.

Canadian Pacific agreed in its negotiations with Kansas City Southern to bear most of the risk of the deal not going through. It will buy Kansas City Southern shares and place them in an independent voting trust, insulating the acquisition target from its control until the STBLatest clears the deal. Were the STB to reject the combination, Canadian Pacific would have to sell the shares of Kansas City Southern, but the current Kansas City Southern shareholders would keep their proceeds.

Canadian National said it was willing to match these terms. It said its offer does not require approval from its own shareholders because of how much cash it has, eliminating a condition in Canadian Pacific’s offer.

Bill Gates’ Cascade Investment, which is Canadian National’s biggest investor with a 14.25% stake, said it fully supports the combination.

A private equity consortium led by Blackstone Group Inc and Global Infrastructure Partners (GIP) made an unsuccessful offer last year to acquire Kansas City Southern. But it was Canadian Pacific’s announcement of a deal with Kansas City Southern that spurred Canadian National into action, as it raised the prospect of losing out to its rival, according to people familiar with the matter.

(Reporting by Shreyasee Raj and Ankit Ajmera in Bengaluru; Additional reporting by Greg Roumeliotis in New York; Editing by Shinjini Ganguli, Anil D’Silva and David Gregorio)

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Colonial Pipeline hackers stole data on Thursday

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The hackers who caused Colonial Pipeline to shut down on Friday began their cyberattack against the top U.S. fuel pipeline operator a day earlier and stole a large amount of data, Bloomberg News reported citing people familiar with the matter.

The attackers are part of a cybercrime group called DarkSide and took nearly 100 gigabytes of data out of Colonial’s network in just two hours on Thursday, Bloomberg reported late Saturday, citing two people involved in the company’s investigation.

Colonial did not immediately reply to an email from Reuters seeking comment outside usual U.S. business hours.

Colonial Pipeline shut its entire network, the source of nearly half of the U.S. East Coast’s fuel supply, after a cyber attack that involved ransomware.

 

(Reporting by Aakriti Bhalla in Bengaluru; Editing by Himani Sarkar)

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TC Energy posts C$1 billion quarterly loss on Keystone XL suspension

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By Nia Williams and Shariq Khan

CALGARY, Alberta (Reuters) -TC Energy Corp swung to a loss in the first quarter, hit by C$2.2 billion ($1.81 billion) impairment charges related to the suspension of its Keystone XL project, the Canadian pipeline operator said on Friday.

The KXL pipeline was planned to carry 830,000 barrels per day of heavy crude across the border from Alberta to Nebraska, but U.S. President Joe Biden revoked a key permit for the project on his first day in office.

TC Energy said the impairment charge was related to halting work on KXL and a reassessment of related projects like the Heartland Pipeline.

“We were very disappointed with the decision in January to revoke the presidential permit,” Chief Executive Francois Poirier said on an earnings call, adding the company was “opportunity-rich” in other parts of its business.

Calgary-based TC Energy owns the largest network of natural gas pipelines in North America as well as the existing Keystone oil pipeline and power and storage assets.

The company posted a C$2.51 billion loss from its oil pipelines, of which Keystone is the biggest contributor, compared with a C$411 million profit in the same period last year.

It reported net loss attributable to shareholders of C$1.1 billion, or C$1.11 per share, in the three months ended March 31 compared with a profit of C$1.1 billion a year earlier.

Excluding items, the company earned C$1.16 per share, slightly better than analysts’ average estimate of C$1.10, according to Refinitiv IBES data.

TC Energy shares closed up 0.2% on the Toronto Stock Exchange at C$61.94.

($1 = 1.2176 Canadian dollars)

(Reporting by Shariq Khan in Bengaluru and Nia Williams in Calgary; Editing by Arun Koyyur and Marguerita Choy)

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Lion Electric says it will build new plant in Illinois, create 750 jobs

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By Tina Bellon

(Reuters) – Canadian electric vehicle company Lion Electric on Friday said it had selected Illinois as the location for its new U.S. manufacturing plant, promising to invest at least $70 million and create about 750 jobs over the next three years.

Lion, known for its electric yellow school buses, said it will build the 900,000 square foot facility in Joliet near Chicago to produce 20,000 electric buses and medium and heavy-duty trucks per year.

The company said it expected the facility to come online in the second half of 2022. Lion Chief Executive Marc Bedard said in an interview that while the Illinois factory would focus on vehicle manufacturing initially, the company might later add battery production. Lion is building a battery production facility in Canada.

Bedard said Lion is expanding in the United States when there is growing demand among school districts and companies to switch to electric transportation. Nearly 400 of the company’s electric school buses are on the road and Amazon.com Inc has said it will buy up to 2,500 trucks from Lion by 2025.

Lion’s expansion also coincides with a favorable regulatory environment under U.S. President Joe Biden, who has pushed for providing generous subsidies to the EV industry.

“We’re looking for regulatory tailwinds that will be favorable to electric,” Bedard said of his decision to build the factory in Illinois. State-funded tax credits for the plant were being negotiated, Lion said.

Lion on Friday also is expected to start trading publicly on the New York and Toronto stock exchanges following a merger with special purpose acquisition company Northern Genesis Acquisition Corp in November.

The deal was valued at $1.9 billion and Lion received nearly $500 million in net cash proceeds, the majority of which it said it plans to invest in battery technology and the new U.S. plant.

 

(This story corrects to show that investment and job creation is over a three year, not two year period in first paragraph)

 

(Reporting by Tina Bellon in Austin, Texas; editing by Grant McCool)

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