The Canadian Pacific Railway company will buy Kansas City Southern (KSC) in a $ 29,000 million deal, securing the first rail network connecting Canada, the United States and Mexico.
In a joint statement, both firms explained that the merger will be through “a cash and stock transaction” and that the $ 29,000 million transaction will include Canadian Pacific Railway’s acquisition of 3,800 million KSC debt.
Under this plan, shareholders of the US company will receive 0.489 of each Canadian Pacific Railways share and $ 90 in cash for each common KSC security they own.
Ultimately, KSC shareholders are expected to own 25% of the Canadian firm’s outstanding common stock.
Additionally, the agreement rates KSC’s stock at $ 275, representing a 23% premium over its end-of-Friday value, which was $ 224.16.
To fund the merger, Canadian Pacific Railways will issue 44.5 million new shares and plans to raise $ 8.6 billion in debt.
The company resulting from the merger will operate approximately 32,186 kilometers of railway and will employ approximately 20,000 people.
Likewise, it is estimated to generate total sales of $ 8.7 billion, taking into account the revenues both companies made in 2020.
“This will create the first rail line between the US, Mexico and Canada to unite two railroads that focus on providing quality service to their customers in order to fully develop the potential of their networks,” the president and president said in the text. Keith Creel.
He added that this merger will benefit the T-MEC, the trade agreement between these three countries, “which makes the efficient integration of the continent’s supply chains more important than ever”.
That trade pact went into effect last July and replaced NAFTA, which had been in force for 26 years.
Creel will become the CEO of the joint venture, which will be renamed Canadian Pacific Kansas City (CPKC), which will be headquartered in Calgary, Canada.
The boards of directors of both companies have unanimously supported the merger, which has already been filed with the US Board of Surface Transportation, which must now approve it.