$29 Billion Railroad Merger to Connect U.S., Mexico and Canada

The combined company, Canadian Pacific Kansas City, will have its global headquarters in Calgary, Alberta, while Kansas City will serve as its U.S. headquarters. It will operate roughly 20,000 miles of rail and generate sales of about $8.7 billion. Canadian Pacific’s chief executive, Keith Creel, will oversee the new entity.

The deal values Kansas City Southern at $275 per share, representing a 23 percent premium to its closing price on Friday. Investors will receive 0.489 of a Canadian Pacific share and $90 in cash for each Kansas City common share.

It is also a significant increase from the reported $208 a share offer from the Blackstone Group, a private equity firm, that Kansas City Southern rebuffed last year. Shares of Kansas City are up 12 percent year-to-date, while shares of Canadian Pacific have climbed almost 10 percent.

The boards of both companies have unanimously approved the cash-and-stock deal, which is expected to close by the middle of 2022, subject to customary approvals.

The railroad industry can be viewed as a bellwether of industrial activity; it expects to benefit from a growing U.S. economy as it emerges from the pandemic. The Federal Reserve has signaled optimism for the nation’s economic outlook, and President Biden signed a $1.9 trillion spending bill into law this month.

Article source: https://www.nytimes.com/2021/03/21/business/railroad-merger-us-mexico-canada.html