Shares of Kansas City Southern (NYSE: KSU) traded up more than 15% in the premarket on Monday after the railroad company announced plans to be acquired by Canadian Pacific (NYSE: CP). There is a lot of regulatory risk involved in railroad mergers, but investors are encouraged by the deal’s prospects and steps taken by the two companies to mitigate the approval risk.
Kansas City Southern has long been the most likely railroad to be acquired, ranking as the seventh largest of the seven major North American railroads. Over the weekend, Canadian Pacific announced a $29 billion deal to acquire the company, valuing shares of Kansas City Southern at $275 apiece.
That’s a 22% premium to the target’s $224.16 Friday close.