Canadian Pacific Railway to buy Kansas City Southern for US$25-billion

Canadian Pacific Railway to buy Kansas City Southern for US$25-billion

Canadian Pacific Railway Ltd. said on Sunday it had agreed to buy Kansas City Southern for US$25-billion in a cash-and-stock deal to create the first rail network connecting Canada, the United States and Mexico.

Shareholders of Kansas City Southern will receive 0.489 of a Canadian Pacific share and US$90 in cash for each KCS common share held, the companies said in a joint statement.

The deal comes amid expectations of a pick-up in U.S.-Mexico trade after Joe Biden replaced Donald Trump as U.S. president, the report said.

Kansas City Southern’s board has approved the bid and the two companies have informally informed the U.S. Surface Transportation Board, whose approval will be necessary for the deal.

The Financial Times first reported on the deal on Sunday.

Calgary-based Canadian Pacific is Canada’s No. 2 railroad operator, behind Canadian National Railway Co. Ltd, with a market value of $50.6-billion.

It owns and operates a transcontinental freight railway in Canada and the United States. Grain haulage is the company’s biggest revenue driver, accounting for about 58 per cent of bulk revenues and about 24 per cent of total freight revenues in 2020.

Kansas City Southern has domestic and international rail operations in North America, focused on the north-south freight corridor connecting commercial and industrial markets in the central United States with industrial cities in Mexico.

Canadian railroad operators’ attempts to buy U.S. rail companies have met limited success due to antitrust concerns.

Canadian Pacific’s latest attempt to expand its U.S. business comes after it dropped a hostile US$28.4-billion takeover bid for Norfolk Southern Corp in April, 2016. Canadian Pacific’s merger talks with CSX Corp, which owns a large network across the eastern United States, failed in 2014.

A bid by CN to buy Warren Buffett-owned Burlington Northern Santa Fe was blocked by U.S. antitrust authorities in 1999-2000.

Published at Sun, 21 Mar 2021 12:12:05 +0000