CALGARY – Canadian Pacific Railway Ltd’s deal to buy US Rival Kansas City Southern will create the first single-owned rail network connecting Canada, the United States and Mexico for $ 25 billion, the companies announced on Sunday, praising the deal as mutually beneficial

On a conference call to discuss the business, executives described it as “historic” and “unprecedented” and said it would result in $ 800 million in annual revenue growth within three years of US Regulatory approval is expected to be granted in mid-2022

“A deal like this has to have the stars aligned, and I would suggest that the stars have aligned to make this deal happen,” said Keith Creel, CEO of CP Rail, noting the two smallest North American Class 1 railways among them have been the top growth profiles in the past three years

“When you harness the power of the two and put them into an expanded network, what opens is compelling. The value it creates for competition, the value it creates in additional service options for our customers, the reach it creates The value it creates for our workforce, given the growth it attracts, will drive their growth “

The COVID-19 pandemic has demonstrated the value of risk-free supply chains, and the passage of the Free Trade Agreement between Canada, the United States and Mexico last year provides “security and stability” for a combined company with operations in all three countries said KCS CEO Pat Ottensmeyer on the conference call

“The operational and cultural alignment between our two companies makes this a natural fit,” he said

On Twitter, Alberta Prime Minister Jason Kenney said he had been briefed by the companies and assured that there will be no job losses in Calgary, the combined company’s global headquarters in Kansas City, Mo., which will be home to U.S Headquarters

“The combined rail network enables CP direct access to the US. Gulf Coast and beyond, so energy from Alberta can be seamlessly transported directly to refineries on the Gulf Coast, improving the economics of crude oil by rail, “Kenney tweeted
As part of the deal, Kansas City Southern shares are valued at $ 275 per share, a 23 percent premium over Friday’s closing prices, the companies said in a joint press release

KCS shareholders will receive 0489 CP shares and $ 90 in cash for each KCS common share held. The resulting company will be 75 percent owned by CP Rail shareholders

The merger must be approved by the Surface Transportation Board, a US Federal regulator to proceed, executives said they said no government approvals are required in Canada or Mexico

The merger will likely be welcomed by investors in both companies on Monday in the form of higher share prices, Credit Suisse analysts said in a report, and expected it to be approved by the US Controller

“There’s little overlap between the CP and (KCS) networks with the one main junction in Kansas City (where the two rails share a yard),” they said, “” We don’t think the combination causes any major alarms will trigger significant competitive damage for shippers or other railways “

The combined company is said to be in Canada, the U, more than 32Operate 100 kilometers of railroad and Mexico employ about 20000 employees and have total sales of approximately $ 87 billion based on 2020 figures

KCS said it generated around 47 percent of its 2020 sales in Mexco, where the company operates under a 50-year renewable energy concession with the federal government that expires in 2047

The combined railroad is to be renamed Canadian Pacific Kansas City and Creel will continue as CEO

CP Rail also announced on Sunday that Creel’s incentive pay has been changed as part of his contract to ensure he runs the company until at least early 2026 to oversee the close of the deal

The company expects annual cost savings of $ 180 million in fuel efficiency, administration, equipment rental, facilities, information technology and licensing That doesn’t mean fewer people will be employed, however, said Nadeem Velani, CFO for CP Rail on Demand

“While some redundant features will be streamlined, we expect the number of employees across the network will increase if the synergies are realized between 2023 and 2025,” he said

John Brooks, CP Rail’s chief marketing officer, said the company expects revenue growth of $ 800 million per year and adjusted profit of $ 600 million over the same period by taking market share in the trucking space wins, attracts new customers and offers makes new routing options to existing clients

To fund the stock view of the merger, CP will issue 445 million new shares The cash portion will be funded by cash and raise approximately $ 8 billion in debt, it said

As part of the merger, CP will assume approximately $ 3 billion of KCS’s outstanding debt. Upon closing, CP expects its outstanding debt to be $ 20 trillion

The deal with KCS follows failed attempts by CP Rail to merge with American railroad CSX in 2014 and with Norfolk Southern a few years later

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World News – CA – Stars Align for CP Rail Deal to Buy Rival for $ 25 Billion, Headquarters Remains in Calgary