Canadian Pacific’s acquisition of KCS railroad back on track

The path is now clear for Canadian Pacific’s $31 billion acquisition of Kansas City Southern railroad to move forward after Canadian National dropped out of the bidding war Wednesday.

The deal could still face tough scrutiny from regulators at the federal Surface Transportation Board, which hasn’t approved any major railroad mergers since the 1990s, but KCS shareholders will be set to get paid once shareholders of both companies and Mexican regulators approve regardless of what the STB ultimately decides.

Canadian Pacific triumphed in the bidding war even though it offered less federal regulators rejected part of CN’s plan. Canadian National will receive $1.4 billion in breakup fees for its trouble.

Canadian National had been facing pressure from a major investor, London-based TCI Fund, which wanted CN to abandon its effort to buy the U.S. railroad. TCI has said it thinks CN should get a new CEO and focus its efforts on improving its own operations.