Canadian Pacific Railway Restricted (CP) and Kansas Metropolis Southern (KCS) have introduced that they’ve entered right into a merger settlement. As soon as ultimate approval is granted by the Floor Transportation Board (“STB”), the transaction will mix the 2 railroads to create the primary rail community connecting america, Mexico and Canada. By seamlessly becoming a member of Kansas Metropolis, Missouri, the guts of America, CP and KCS will collectively join clients by way of single-network transportation choices between factors within the CP system throughout Canada, the Midwest American and the Northeastern United States and factors on the KCS system by way of Mexico and the south-central United States

The brand new single-line mixed community choices will considerably broaden the market attain for purchasers served by CP and KCS, present new aggressive transportation service choices and assist North American financial development. The transaction can also be anticipated to create jobs throughout the mixed community. As well as, enhancements in effectivity and repair are anticipated to yield important environmental advantages.

Whereas remaining the smallest of the six U.S. Class 1 railways by way of income, the merged firm will likely be a a lot bigger and extra aggressive community, working roughly 20,000 miles of railroad, using practically 20,000 folks. and producing whole revenues of roughly $ 8.7 billion primarily based on precise 2020 outcomes. revenues.

CP President and CEO Keith Creel stated, “This transaction will likely be transformative for North America, delivering important optimistic impacts for our workers, clients, communities and respective shareholders. This may create the primary United States-Mexico-Canada railway, bringing collectively two railways which have made a powerful dedication to offering high quality service to their clients as a way to unlock the complete potential of their networks. CP and KCS have been the 2 prime performing Class 1 railways over the previous three years by way of income development. “

Keith continued, “The brand new competitors that we are going to be injecting into the North American transportation market can not occur quickly sufficient, because the USMCA’s new commerce settlement between these three nations makes the environment friendly integration of the chains. provide of the continent extra necessary than ever. Over the following few months, we stay up for talking with clients of all sizes and communities of the Mixed Community, to current the compelling case for this mix and to strengthen our unwavering dedication to service and security as we deliver collectively these two iconic corporations.

KCS President and CEO Patrick J. Ottensmeyer stated, “KCS has lengthy been the friendliest transportation supplier in North America. By combining with CP, clients could have entry to new single-line transportation providers that can present them with the perfect worth for his or her transportation greenback and a powerful aggressive various to the bigger Class 1. The cultures of our corporations are aligned and anchored to the very best requirements of security, service and efficiency. “

Patrick continued, “You will need to notice that KCS workers will profit from being a part of a real continental North American firm, which creates a stable platform for income development, capital investments and future job creation. Prospects, social companions and shareholders will all profit from the benefits inherent on this mixture, together with engaging synergies and complementary routes. “

Each CEOs have been environmental champions, recognizing the necessary position that rail performs in decreasing general transport emissions. They stated, “This mix advances our shared science-based commitments beneath the Paris Settlement to enhance gasoline effectivity and cut back emissions in assist of a extra sustainable North American provide chain. . “

Merger settlement means CP has agreed to amass KCS in a inventory and money transaction with an enterprise worth of roughly $ 29 billion¹, which incorporates the belief of $ 3.8 billion in excellent debt from KCS. The transaction, which has unanimous assist from each boards of administrators, values ​​KCS at $ 275 per share, a premium of 23%.², primarily based on the CP and KCS closing costs on March 19, 2021 (and $ 270 per share, i.e. a premium of 26%³, primarily based on quantity weighted common costs CP and KCS respectively over 30 days (“VWAP”)).

The references:

1. Except in any other case indicated, all figures are in US {dollars}.
2. Based mostly on the closing costs of KCS and CP shares of $ 224.16 and $ 474.27 CAD (on the alternate price of 1.2506), respectively, as of March 19, 2021.
3. Based mostly on KCS and CP’s 30-day quantity weighted common costs (“VWAP”) of $ 213.87 and $ 368.22, respectively, as of March 19
   2021.