CP shareholders approve KCS merger

by Emily Atkins

More than 99 percent of Canadian Pacific shareholders have voted in favour of the merger with Kansas City Southern railway.

A special shareholders meeting was held on December 8 to gauge support for the proposed transaction where they voted on two items of business.

The first was an ordinary resolution (Share Issuance Resolution) to approve the issuance of up to 277,960,197 CP common shares as the share consideration under the terms of the merger agreement. It was approved by 99.91 percent of shareholders.

The second was a special resolution (Name Change Resolution) to approve an amendment to CP’s articles of incorporation to change its name to Canadian Pacific Kansas City Limited, a change contingent upon the approval by the U.S. Surface Transportation Board (STB) of the proposed CP-KCS combination. It received approval from 99.85 percent.

“The shareholder approvals today are a key step on our path to this once-in-a-lifetime partnership to create the first U.S.-Mexico-Canada rail network,” said Keith Creel, CP’s president and CEO.

“In the coming days, we will be working to complete the steps required to close into the voting trust, and in the months ahead we look forward to participating in the STB’s comprehensive regulatory review.”

CP has agreed to acquire KCS in a stock and cash transaction representing an enterprise value of approximately $31 billion, which includes the assumption of $3.8 billion of outstanding KCS debt.

The transaction, which has the unanimous support of both boards of directors, values KCS at $300 per share, representing a 34 percent premium, based on the CP closing price on Aug. 9, 2021, the date prior to which CP submitted a revised offer to acquire KCS, and KCS’s unaffected closing price on March 19, 2021.

On Sept. 30, 2021, the STB confirmed that it approved the use of a voting trust for the transaction. The conditions to closing into voting trust include receipt of approval from the shareholders of both companies along with the satisfaction of other customary closing conditions, including receipt of Mexican regulatory approvals.

Required Mexican regulatory approvals were received last month and a special meeting of KCS stockholders to vote on the merger agreement is scheduled for Friday, Dec. 10, 2021. Provided the transaction is approved by KCS stockholders on Friday, the transaction is expected to close into trust two business days later on Dec. 14, 2021.

On Nov. 23, 2021, the STB formally accepted the CP-KCS control application and issued a procedural schedule. The STB’s review of CP’s proposed control of KCS is expected to be completed in the fourth quarter of 2022.