A Canadian National Railway freight train in Tyendinaga, Ontario, Canada, February 21, 2020. REUTERS/Chris Helgren
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DECOUPLING. When mergers get going, those merging look for certainty. One form of insurance is a break fee payable if one partner jumps, say, for a better deal. So it is with AT&T’s (T.N) merger of its media assets with Discovery (DISCA.O). The larger company’s break fee would be $1.8 billion, while Discovery boss Chief Executive David Zaslav would have to come up with $720 million.
That’s in proportion to the two companies’ contributions to the new entity. But Discovery’s lower cost would be more painful, absorbing a third of the company’s cash and leaving its entire future in limbo.
It could be worse. In Canadian National Railway’s (CNR.TO) bid for U.S. railroad Kansas City Southern (KSU.N), there might be two fees. Canadian National looks to have wooed Kansas City away from an agreed merger with Canadian Pacific Railway (CP.TO) read more . If it stays that way, the Montreal-based operator will have to pay the $700 million penalty built into Kansas City’s original deal. But if regulators won't bless the revised union in the promised form, Canadian National might end up paying another $1 billion break fee, to the consternation of Chris Hohn of TCI Fund Management. Two break fees are definitely not better than one. (By Richard Beales)
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Earlier in Capital Calls:
JPMorgan's top team read more
FirstGroup’s U.S. bus sale looks hard to divert read more
Stellantis spins wheels with Foxconn tech deal read more
Accor makes cheeky late check-in to SPAC party read more
UK’s Eurostar dodge misses a trick read more
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Capital Calls: A tale of two break fees - Reuters
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