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Infrastructure Investment Firms Reportedly Eye Kansas City Southern

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Infrastructure Investment Firms Reportedly Eye Kansas City Southern

Two major infrastructure investment firms, Global Infrastructure Partners and the Blackstone Group's infrastructure segment, are mulling over whether to attempt to acquire U.S. Class I railroad Kansas City Southern (NYSE: KSU), according to an article in the Wall Street Journal (WSJ).

The article said the two firms are considering an acquisition and talking with banks about the prospect, according to the article. But the firms haven't decided their course of action, and Kansas City Southern (KCS) could also reject their offer, the article said. 

KCS could cost more than $21 billion, a figure that accounts for the railroad's market value as well as its debt, according to sources who spoke with WSJ.

Global Infrastructure Partners and the Blackstone Group declined to comment, while KCS didn't return a request for comment.

Railroads are an attractive asset for infrastructure investment firms because they are an asset that can generate profit long-term, experts told FreightWaves last December. A number of infrastructure investment firms acquired short line railroads last year, most notably Brookfield Infrastructure and GIC's acquisition of Genesee & Wyoming.

Although KCS is a Class I railroad, investors might be attracted to its smaller size compared with its peers and its exposure to cross-border trade with Mexico, according to the WSJ article.

This isn't the first time that KCS has been in the news this year regarding a proposed acquisition. In June, a European report speculated that competing railroads or an infrastructure investment firm could be eyeing a KCS acquisition, according to Seeking Alpha.

KCS CEO Pat Ottensmeyer responded to those reports during the company's second-quarter earnings call on July 17.

"We saw a lot of noise a few weeks ago. A lot of media seemed to be coming out of Europe or London about KSU and a possibility that someone was preparing for a deal. And obviously, the standard answer is no comment on things like that," Ottensmeyer said. "But the story behind that is, we've got a terrific plan. We've got outstanding opportunities. We have a lot of runway to have a successful run as an independent, stand-alone publicly-traded company. And that's our focus and that's what we're going to do. We're executing very well. We've got growth."

For more FreightWaves articles by Joanna Marsh, click here.

Related articles: 

Experts predict more short line railroad mergers and acquisitions

How will newly acquired Genesee and Wyoming pay for its infrastructure?

GWR realizes goal by being acquired at a 40 percent premium

 

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