CP Rail to buy Kansas City Southern to create first rail network connecting Canada, the United States and Mexico

$25 billion offer will be ‘transformative for The United States and Canada,’ states CEO

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Canadian Pacific Train Ltd. consented to purchase Kansas City Southern for US$25 billion, looking for to develop a 20,000-mile rail network connecting the U.S., Mexico and Canada.

Kansas City financiers will get 0.489 of a CP share and US$90 in money for each share they hold, valuing the stock at US$275 each — 23 percent more than Friday’s record close, according to a declaration from both business on Sunday.

The deal offers CP access to the Kansas City, Missouri-based business’s stretching Midwestern rail network that links farms in Kansas and Missouri to ports along the Gulf of Mexico. It would likewise offer it reach to Mexico, that made up nearly half of Kansas City Southern’s income in 2015, and develop the only network that cuts through all 3 North American nations.

“This transaction will be transformative for North America,” CP President and President Keith Creel stated.

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Creel will be CEO of the brand-new business, to be based in Calgary, and is anticipated to stay at the helm till a minimum of early 2026, according to a different declaration. The combined entity, to be called Canadian Pacific Kansas City, or CPKC, will have income of about US$8.7 billion and nearly 20,000 workers.

Trade Play

The offer comes as trade throughout the 3 countries is anticipated to get under the Biden administration. Simply days after his inauguration, U.S. President Joe Biden spoke with the leaders of Canada and Mexico, his very first calls with foreign equivalents, where concerns from trade to environment modification were gone over.

Mexico is an important provider of autos, electronic devices and food and a significant consumer of grain, fuel and durable goods — ties that are most likely to be enhanced by July’s passage of the U.S.-Mexico-Canada trade pact.

Kansas City’s special network connecting Mexico’s biggest commercial cities and ports to the U.S. Midwest likewise would be placed to benefit if the coronavirus pandemic and fraying ties in between the U.S. and China trigger business to move lower-wage production from Asia to The United States And Canada.

As part of the deal, CP will provide 44.5 million brand-new shares, to be funded with cash-on-hand and about US$8.6 billion in financial obligation.

The offer is anticipated to enhance CP’s adjusted diluted EPS in the very first complete year after conclusion, producing double-digit accretion upon the complete awareness of synergies afterwards.

Kansas City has actually been a takeover target prior to. In September, Dow Jones reported that the business declined a US$20 billion deal from Blackstone Group Inc. and Global Facilities Partners.


Jobber Wiki author Frank Long contributed to this report.