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  • CN bids $33.7B for Kansas City Southern, tops $25B proposal
    The Canadian Press

    CN bids $33.7B for Kansas City Southern, tops $25B proposal

    A bidding war is breaking out for Kansas City Southern, with Canadian National Railway making a $33.7 billion cash-and-stock offer for the railway. The bid trumps a $25 billion cash-and-stock proposal made by Canadian Pacific last month. Any deal would capitalize on growing trade across North America by creating the first railroad that would link the United States, Mexico and Canada. Last year the three countries entered into a revamped regional trade pact, negotiated by President Donald Trump, that is expected to encourage trade and investment across North America. A surge in manufacturing is already benefitting the companies. According to a research report Monday from Stifel, the six major railroad all reported double-digit increases in volume over the past week compared with a year earlier when the coronavirus pandemic cut shipping volume sharply. “These strong volumes, when coupled with other data points such as the ISM, should bode well for the economy,” analyst Benjamin Nolan wrote. Shares of Kansas City Southern closed Tuesday up 15%. CN's stock fell almost 7%. Canadian Pacific's shares slipped closed to 3% CN said its offer is worth $325 per Kansas City Southern share. Kansas City Southern shareholders would receive $200 in cash and 1.059 shares of CN common stock for each share. The transaction would include about $3.8 billion in Kansas City Southern debt. If the two companies were to combine, it would create a business connecting ports and rails in the U.S., Mexico and Canada. “CN and Kansas City Southern have highly complementary networks with limited overlap that will enable them to accelerate growth in single-owner, single-operator, end-to-end service across North America," CN President and CEO JJ Ruest said in a statement. Kansas City Southern acknowledged receiving Canadian National's proposal Tuesday and said the railroad's board will evaluate it before responding. A short time later, Kansas City Southern also issued a joint news release with Canadian Pacific touting the fact that more than 400 shippers and other stakeholders have submitted letters to the Surface Transportation Board supporting the original deal between those railroads. The two railroads have released several similar statements since they announced their deal last month. Canadian Pacific has said its proposed deal would create a combined company that would operate about 20,000 miles of railway, employ 20,000 people and generate annual revenue of about $8.7 billion, but would still be the smallest of all the major railroads. Canadian Pacific said Tuesday that CN's new competing offer raises more concerns about reducing competition than its deal. It argued that is because Canadian National and Kansas City Southern have several competing rail lines, and the deal may destabilize the current competitive balance among the largest railroads. “Canadian National's proposal is massively complex and likely to fail,” Canadian Pacific said in a statement. If Kansas City Southern's board decides to back Canadian National's higher offer, Canadian Pacific would be entitled to a $700 million breakup fee. Citi research analyst Christian Wetherbee said Canadian Pacific may respond with a higher bid, but he said whichever Canadian railroad misses out on acquiring Kansas City Southern could also end up trying to acquire another U.S. railroad. “So while a bidding war is possible, it seems fairly likely that the loser of that war would have to look for another target, which could likely be CSX or Norfolk Southern,” Wetherbee said in a research note. Canadian Pacific tried to acquire Norfolk Southern five years ago, but it abandoned that roughly $30 billion bid after it encountered strong opposition from Norfolk Southern, politicians, rail customers along the route and other railroads. Wary U.S. regulators have not approved a major railroad merger since the 1990s, but industry analysts have said that Canadian Pacific’s proposed $25 billion acquisition of Kansas City Southern has a good chance of getting the green light because there is little overlap between the two lines. The service problems and economic damage that followed railroad mergers in the 1990s are part of why regulators adopted tough rules for major railroad mergers in 2001. Regulators have said that, generally, any merger involving a major railroad must enhance competition and serve the public interest. Edward Jones analyst Jeff Windau said Canadian National’s competing offer for Kansas City Southern would likely face tougher scrutiny from regulators because those two railroads both have north-south lines that cross the middle of the country down to the Gulf Coast where Canadian Pacific doesn’t have any routes that directly compete with Kansas City Southern’s network. “There’s the potential of viewing that as essentially eliminating a competitor down the central part of the United States,” Windau said. “We think that potential for viewing that as reducing competition could be increasing the regulatory hurdle in the Canadian National case.” Windau said the deal could also face more scrutiny because Canadian National is bigger than Canadian Pacific, so the deal could be seen as making Canadian National an even stronger competitor. Michelle Chapman And Josh Funk, The Associated Press

  • Chauvin trial: Appealing the verdict is a ‘hard burden,’ says former Maryland Assistant AG
    Yahoo Finance

    Chauvin trial: Appealing the verdict is a ‘hard burden,’ says former Maryland Assistant AG

    Minneapolis Police Department officer Derek Chauvin was found guilty on charges of second-degree, third-degree murder, and second-degree manslaughter in the death of George Floyd on Tuesday.

  • AP sources: Biden to pledge halving greenhouse gases by 2030
    The Canadian Press

    AP sources: Biden to pledge halving greenhouse gases by 2030

    WASHINGTON — President Joe Biden will pledge to cut U.S. greenhouse gas emissions at least in half by 2030 as he convenes a virtual climate summit with 40 world leaders, according to three people with knowledge of the White House plans. The 50% target would nearly double the nation’s previous commitment and require dramatic changes in the power and transportation sectors, including significant increases in renewable energy such as wind and solar power and steep cuts in emissions from fossil fuels such as coal and oil. The nonbinding but symbolically important pledge is a key element of the summit, which begins Thursday as world leaders gather online to share strategies to combat climate change. The emissions target has been eagerly awaited by all sides of the climate debate. It will signal how aggressively Biden wants to move on global warming, a divisive and expensive issue that has riled Republicans to complain about job-killing government overreach even as some on the left worry Biden has not gone far enough to address a profound threat to the planet. The three people who know about the White House plans spoke on condition of anonymity on Tuesday because they were not authorized to discuss the pledge ahead of Biden's announcement. Biden has sought to ensure that the target is aggressive enough to have a tangible impact on climate change efforts, not only in the U.S. but throughout the world, while also achievable under a closely divided Congress. Scientists, environmental groups and even business leaders have called on Biden to set a target that would cut U.S. greenhouse gas emissions by at least 50% below 2005 levels by 2030. The target Biden chooses “is setting the tone for the level of ambition and the pace of emission reductions over the next decade,? Kate Larsen, a former White House adviser who helped develop President Barack Obama’s climate plan, said before the target was revealed. A goal of at least 50% emissions cuts “puts the U.S. at the top of the pack,” she added. The climate summit is “the starting gun for climate diplomacy” after a four-year “hiatus” under former President Donald Trump, said Larsen, now a director at the Rhodium Group, an independent research firm. Former Secretary of State John Kerry, Biden’s top climate envoy, has been pressing global leaders, including his counterpart in China, for commitments and alliances on climate efforts. Sen. Ed Markey, a Massachusetts Democrat who reintroduced the Green New Deal on Tuesday with Rep. Alexandria Ocasio-Cortez, D-N.Y., said the 50% target was appropriate to meet the scope and scale of the climate crisis. “The United States must be an undeniable global leader in climate action,'' Markey said. “We cannot preach temperance from a barstool and not pay our fair share when approximately 40% of all the excess carbon dioxide in the atmosphere is red, white and blue.'' A 50% reduction by 2030 is “technically feasible and well within our reach,'' Markey added. “We can and should fight to pass legislation and deploy funding that will allow us to exceed that target.'' Like other nations, the U.S. goal includes methane and some hydrofluorocarbon gases that trap more heat but don’t last as long. The 50% pledge was first reported by The Washington Post. ___ Associated Press writer Aamer Madhani in Washington contributed to this report. Matthew Daly, The Associated Press

  • Netflix's subscriber growth, stock zapped as pandemic eases
    The Canadian Press

    Netflix's subscriber growth, stock zapped as pandemic eases

    SAN RAMON, Calif. — Netflix’s rapid subscriber growth is slowing far faster than anticipated as people who have been cooped at home during the pandemic are able to get out and do other things again. The video-streaming service added 4 million more worldwide subscribers from January through March, its smallest gain during that three-month period in four years. The performance reported Tuesday was about 2 million fewer subscribers than both management and analysts had predicted Netflix would add during the first quarter. It marked a huge comedown from the same time last year when Netflix added nearly 16 million subscribers. That came just as governments around the world imposed lockdowns that created a huge captive audience for the leading video-streaming service. Signalling that the trend is continuing, Netflix forecast an increase of just 1 million worldwide subscribers in the current April-June period, down from an increase of 10 million subscribers at the same time last year. The poor showing to start the year rattled investors, causing the Los Gatos, California, company's stock to drop by more than 10% in extended trading, even though Netflix's revenue hit analyst targets and its profit exceeded estimates. Netflix earned $1.71 billion, or $3.75 per share, more than doubling from a year ago. Revenue climbed 24% from the same time last year to $7.16 billion. The inevitable slowdown in subscriber growth had been widely telegraphed by Netflix’s management in repeated reminders that its gains were a pandemic-driven anomaly. Now that a large swath of the population has been vaccinated, people are able to move around more freely and are finding other diversions besides watching TV series and movies on Netflix. The big question is how big this year’s drop will be from last year’s full-year increase of 37 million worldwide subscribers — by far the biggest since Netflix expanded its DVD-by-rental service into video streaming 14 years ago. Netflix management sought to reassure investors in a letter that predicted subscriber growth would improve during the second half of the year as more TV series and movies that had to be delayed during the pandemic are finished and released. But what happened during the first quarter is a indication Netflix may be headed toward a lacklustre year. The last time Netflix started a year with a lower gain — 5.3 million subscribers in the first quarter of 2017 — the service ended up with an annual increase of 21.6 million subscribers. Netflix management doesn’t make annual growth projections, maintaining that it's difficult enough to predict how many subscribers its service will add from one quarter to the next. Besides no longer benefiting from people being stuck at home most of the time, Netflix is also facing more competition than ever from a wide range of video streaming services from major companies such as Disney, Apple and HBO. Netflix, though, remains far ahead of the rest of the pack, with nearly 208 million worldwide subscribers. It also benefits from an award-winning lineup of shows that include still-popular series such as “Stranger Things,” “The Crown,” and “Ozark,” with more potential hits always brewing in a video factory that spends billions of dollars annually on original programming. In its quarterly letter, Netflix said its past success “fuels our confidence and optimism for our next decade of challenges, growth and innovation." The company also emphasized that it didn't believe the intensifying competition had anything to do with its slowing subscriber growth. A large portion of Netflix's programming has been been financed by debt, but the company no longer expects to have to borrow to foot those bills. What’s more, Netflix is now bringing in more cash than it is burning, something it has rarely done in the best. After posting a positive cash flow of $1.9 billion last year, Netflix expects to break even this year. Michael Liedtke, The Associated Press