The two businesses announced Sunday that Canadian Pacific Railway has agreed to buy Kansas City Southern in a $25 billion merger that will build the first rail network spanning the United States, Mexico, and Canada.
In downtown Davenport, Iowa, a train runs along the Mississippi River levee. (Education Images/Universal Images Group via Getty Images; photo by Don… [+] & Melinda Crawford/Education Images/Universal Images Group)
Getty Images/Universal Images Group/Education Images
The deal, which is anticipated to finalize in the middle of next year, values Kansas City Southern at $275 per share, up almost 23% from the stock’s Friday closing price.
Shareholders of Kansas City Southern, who would own about 25% of the combined company, will get nearly 0.5 shares of Canadian Pacific and $90 in cash for each share of Kansas City Southern owned.
Canadian Pacific, based in Calgary, Alberta, will also acquire Kansas City Southern’s $3.8 billion in debt, bringing the total transaction value to about $29 billion.
To fund the purchase, Canadian Pacific will issue 44.5 million new shares and raise $8.6 billion in additional debt, raising its total outstanding debt to nearly $20.2 billion once the deal complete.
The combined firm, which will be known as Canadian Pacific Kansas City, will be the smallest of the six U.S. Class 1 railroads in terms of revenue, with around $9 billion in annual sales, 20,000 miles of rail, and 20,000 workers.
Canadian Pacific and Kansas City Southern mostly move commodities, automotive components, and food across North America. The united firm will be headquartered in Calgary, with operations in Kansas City and a regional headquarters in Mexico City. The new United States-Mexico-Canada Agreement, which took effect in July and replaced the North American Free Trade Agreement, will regulate the corporation. Strengthened labor laws and an emphasis on improving wages and adding jobs in the automobile industry are among the elements of the deal.
“The new competition we will inject into the North American transportation market cannot come soon enough,” Canadian Pacific President and CEO Keith Creel said in a statement. “The new USMCA trade agreement between these three countries makes the efficient integration of the continent’s supply chains more important than ever before.” He’ll be in charge of the united entity.
A $25 billion merger between railroads has been reached (WSJ)
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