Canadian Pacific Railway Ltd (CP) on Sunday said it has agreed to buy Kansas City Southern (KCS) for $25 billion in a cash-and-shares deal to create the first rail network connecting the United States, Mexico and Canada as it bets on a pickup in North American trade.
Here are some highlights of the transaction.
- The new entity would be the smallest of six U.S. Class 1 railroads by revenue; have a combined operating rail network of about 20,000 miles (32,200 km), employ close to 20,000 people and generate total revenue of approximately $8.7 billion based on 2020 actual revenue.
- The combined group would create the first rail network connecting the three nations, offering a single-network link between points on CP’s system in Canada, the U.S. Midwest, and the U.S. Northeast and points on KCS’ system throughout Mexico and the South Central United States.
- Once approved, a single integrated rail system would connect ports on the U.S. Gulf, Atlantic and Pacific coasts with overseas markets.
- It is the biggest M&A deal announced in 2021 and the biggest merger involving two rail companies, though it ranks behind Berkshire Hathaway’s purchase of BNSF in 2010 for $26.4 billion.
- The new company will be led by current CP CEO Keith Creel and have its global headquarters in Calgary.
- CP will issue 44.5 million new shares, raise $8.6 billion in debt and cash-on-hand to fund the acquisition.
- Upon shareholder approval of the transaction, CP will acquire KCS shares and place them in an independent voting trust which would insulate KCS from control by CP until the U.S. Surface Transportation Board authorizes control.