A Canadian Pacific Railway Ltd. train departing from Hardisty, Alberta, Canada.
Photographer: Brett Gundlock / Bloomberg
Photographer: Brett Gundlock / Bloomberg
Canadian Pacific Railway Ltd. agreed to buy Kansas City Southern for $ 25 billion, trying to create a 20,000-mile rail network linking the United States, Mexico and Canada.
Kansas City investors will receive $ 0.489 of a CP share and $ 90 in cash for each share they hold, valuing the share at $ 275 a piece – 23% more than Friday’s record close statement of both companies on Sunday.
The transaction provides CP access to the company’s Kansas City, Missouri extended Midwestern rail network, which connects Kansas and Missouri farms to ports along the Gulf of Mexico. It would also provide coverage to Mexico, which accounted for nearly half of Kansas City Southern’s revenue last year, and create the only network across all three North American countries.
“This transaction will be transformative for North America,” said CP President and CEO Keith Creel.
Creel will be the CEO of the new Calgary-based company, and is expected to remain in charge until at least the beginning of 2026, according to a separate report. statement. The combined entity, called Canadian Pacific Kansas City, or CPKC, will have revenues of approximately $ 8.7 billion and nearly 20,000 employees.
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The agreement comes as trade between the three nations is expected to begin under the Biden administration. Just days after taking office, US President Joe Biden spoke with leaders in Canada and Mexico, his first calls with foreign counterparts, where issues from trade to climate change were discussed.
The $ 25 billion Canadian bid for Kansas City Southern would create a T-shaped rail network that runs from Canada through the US Midwest and deep into Mexico.
Mexico is a crucial supplier of automobiles, electronics and food and a major customer of grain, fuel and consumer goods – links that could be strengthened by the adoption of the US-Mexico-Canada trade pact in July.
Kansas City’s unique network linking Mexico’s largest industrial cities and ports to the U.S. Midwest would also be positioned to benefit if the coronavirus pandemic and unbalanced U.S.-China ties cause companies to shift production to lower wages. from Asia to North America.
As part of the transaction, CP will issue 44.5 million new shares, to be financed in cash and approximately $ 8.6 billion in debt.
The transaction is expected to increase CP’s adjusted diluted EPS in the first full year after completion, generating a double-digit accumulation after full synergies have been achieved.
Kansas City was another target. In September, Dow Jones reported that the company rejected a $ 20 billion offer from Blackstone Group Inc. and Global Infrastructure Partners.
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