SHAREHOLDERS of both Canadian Pacific (CP) and Kansas City Southern (KCS) have voted unanimously to back the planned merger of the two North American Class 1s, which would create Canadian Pacific Kansas City (CPKC), the first US-Mexico-Canada railway.
Of the 64.5 million shares voting at a special meeting held by KCS on December 10, approximately 99.6% were cast in favour of adopting the proposed merger agreement. CP also reported more than 99% support from shareholders for the merger during its virtual shareholder meeting held on December 8.
KCS says it expects the merger transaction to close on December 14. “KCS stockholders will receive $US 90 in cash and 2.884 CP shares for each KCS common share held and $US 37.50 in cash for each KCS preferred share held,” the Class 1 reported. KCS added that immediately upon close, ownership of the railway will be held in a voting trust pending the Surface Transportation Board’s review and approval of CP’s proposed control of KCS, which is expected to occur in the fourth quarter of 2022.
“This week, shareholders of both CP and KCS overwhelmingly supported this transformative proposal to create the first US-Mexico-Canada rail network,” says CP president and CEO, Mr Keith Creel. “With strong shareholder support, we are excited to complete the steps required to close the CP-KCS transaction into the voting trust, a critical milestone in the journey to make Canadian Pacific Kansas City a reality.”
CP and KCS agreed in September to combine in a stock and cash transaction representing an enterprise value of approximately $US 31bn, which includes the assumption of $US 3.8bn of outstanding KCS debt. CP says the transaction, which has the unanimous support of both boards of directors, values KCS at $US 300 per share, representing a 34% premium, based on the CP closing price on August 9 2021, and KCS’s unaffected closing price on March 19 2021.
On September 30, STB confirmed that it approved the use of a voting trust for the transaction; and on November 23, accepted for consideration the CP-KCS merger application and adopted a procedural schedule that sets deadlines for comments, responsive applications, final briefs and other filings.
CP and KCS received the required Mexican regulatory pre-transaction control approvals on November 26.
The January edition of IRJ, The Railway in 2022, will include insight from Creel and KCS president and CEO, Patrick Ottensmeyer.
