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Illustration: Aïda Amer/Axios

The freight train trip from Canada to Mexico still goes through Kansas City, but the rest of the route remains unsettled.

Driving the news: Kansas City Southern (NYSE: KCS) on Friday canceled its planned $29 billion merger with Canadian Pacific Railway (NYSE: CP), instead opting for a $33.6 billion deal with Canadian National Railway (NYSE: CNI).

Why it matters: Either deal would create the only railroad that runs from Canada to Mexico, and comes against the backdrop of increased transcontinental shipping due to post-pandemic reopening and the USMCA trade deal.

Details: Canadian National offered $325 per share, versus $275 per share from Canadian Pacific. Kansas City Southern shareholders retain 12.6% of the combined company, whereas they would have retained 25% under terms of the original agreement.

  • Both offers include the assumption of around $3.8 billion in debt.
  • Kansas City Southern has already paid a $700 million termination fee to Canadian Pacific, which is expected to be reimbursed by Canadian National, per an SEC filing.

Not so fast: Canadian Pacific opted against raising its bid, but not because it's given up. Instead, the spurned suitor is biding its time, believing that the new deal will be blocked by U.S. regulators.

  • Its optimism is rooted in a decision last week by the U.S. Surface Transportation Board (STB) to deny Canadian National's request to form a voting trust that would buy and operate Kansas City Southern while the deal is under regulatory review.
  • Canadian Pacific had been successful in its own voting trust motion, and believes the STB reticence on the current deal is because of some route overlap and competition issues that aren't present in the original merger. That said, STB is taking a second look at Canadian National's offer, now that Kansas City Southern has actually accepted it.

The bottom line: If STB does stop the Canadian National train, Canadian Pacific remains positioned to pick up the route.

Go deeper

WHO warns against travel bans on southern African countries

Matshidiso Moeti, World Health Organization regional director for Africa. Photo: Sylvain Gaboury/Patrick McMullan via Getty Images

The World Health Organization called on countries Sunday to not impose travel bans on southern African nations amid concerns over the new COVID-19 Omicron variant.

Why it matters: The U.S. and countries in Europe and the Asia-Pacific announced travel restrictions in response to Omicron, which was first detected in South Africa. It's since spread to several European countries, Canada, Israel, Australia and Hong Kong. The WHO noted in a statement that only two southern African nations have detected the new variant.

Updated 4 hours ago - Health

First North American Omicron cases identified in Canada

COVID-19 testing personnel at Toronto Pearson International Airport in September. Photo: Steve Russell/Toronto Star via Getty Images

The first two cases of the new Omicron variant have been detected in North America, the Canadian government announced Sunday evening.

Driving the news: The World Health Organization has named Omicron a "variant of concern," but cautioned earlier on Sunday that it is not yet clear whether it's more transmissible than other strains of COVID-19.

8 hours ago - Health

WHO: Not yet known whether Omicron leads to more severe disease

Photo illustration: Pavlo Gonchar/SOPA Images/LightRocket via Getty Images

The World Health Organization on Sunday said that it is not yet clear whether the newly discovered Omicron variant is more transmissible than other strains of the COVID-19 virus.

Why it matters: The agency's statement comes as the variant, discovered in South Africa, has already been detected in European and Asian countries.