In a continuously changing business landscape, many companies and operations in the U.S. and abroad were hit hard by the coronavirus’ impact on business, including the local, long-standing Kansas City Southern.
Reports have spread that two private equity firms, Blackstone Group Inc. and Global Infrastructure, are considering a purchase of Kansas City Southern in a deal worth around $21 billion.
A news release from Kansas City Southern in mid-July revealed that for the second quarter, Kansas City Southern reported revenues of $547.9 million, a decrease of 23% from second quarter 2019.
Overall, carload volumes were down 21% compared to prior year, the release said, the decreases primarily a result of an overall decline in demand due to COVID-19.
Although the smallest of Class I railroads in the U.S., Kansas City Southern has a valuable asset in a line that crosses through the U.S. southern border into Mexico and further south into Panama. The rail line runs north from Kansas City into Illinois and into states located in the southeast of the U.S.
“Kansas City Southern demonstrated excellent execution during an extremely challenging quarter,” President and Chief Executive Officer, Patrick J. Ottensmeyer said. “Our network experienced a rapid decline in volumes followed by an unprecedented rebound, forcing us to quickly adjust our service model to match customer demand while optimizing our cost structure.”
If purchased, Kansas City Southern would face greater regulatory risk because of its Mexican operations, although a bid by private equity players could face less U.S. regulatory scrutiny than a bid by a competing railroad.