Canadian Pacific Railway Limited announced on Sunday that it has completed negotiations of its proposed merger agreement with Kansas City Southern (KCS), and the KCS Board of Directors has deemed CP’s proposal a “Company Superior Proposal.”
KCS has also notified CN that it intends to terminate their merger agreement and enter into the definitive agreement with CP.
Under the terms of the CN-KCS merger agreement, CN has five business days to negotiate amendments to the CN-KCS merger agreement and the KCS board has that time to determine whether any such amendments would cause the CP agreement to no longer constitute a “Company Superior Proposal.”
34 percent premium
CP’s merger proposal values KCS at $300 per share, representing a 34 percent premium, based on the CP closing price on August 9, 2021 and KCS’s unaffected closing price on March 19, 2021. Following the closing into a voting trust, common shareholders of KCS will receive 2.884 CP common shares and $90 in cash for each share of KCS common stock held. The proposed transaction includes the assumption of $3.8 billion of outstanding KCS debt.
CP president and CEO Keith Creel
“We are pleased to reach this important milestone and again pursue this once-in-a-lifetime partnership,” said Keith Creel, CP president and CEO.
“As we have said throughout this process, CP remains committed to everything this opportunity presents. This merger proposal provides KCS stockholders greater regulatory and value certainty. We are excited to move forward as we work toward making this perfect match a reality.”
CP has maintained throughout the duelling merger proposals that the CP-KCS combination would “enhance competition, create new and stronger competitive single-line options against existing single-line routes while taking trucks off the highway”.
CP-KCS would maintain all existing freight rail gateways and maintain competition in the Baton Rouge to New Orleans corridor, while creating new north-south lanes between Western Canada, the Upper Midwest and the Gulf Coast and Mexico.