Approval for merger still pending between Canadian Pacific and Kansas City Southern; voting trust established

Canadian Pacific Railway Limited announced on Dec. 14, 2021, the completion of its acquisition of Kansas City Southern. The deal is still subject to, and contingent upon, approval by the Surface Transportation Board, which is not expected before the fourth quarter of 2022. The shares of KCS transferred in the deal were put into a voting trust, as required by law. If STB approval is not forthcoming, the deal would be unwound and investors and stockholders would get their money back.

Farmers are following the merger with intense interest, since if approved CP’s control of KCS would create Canadian Pacific Kansas City Limited, the only single-line railroad linking the United States, Mexico and Canada. Expected benefits from the business combination will not be realized until the STB approves CP’s control of KCS’ railroads, the CP said in a press release. “Upon obtaining control approval from the STB, the two companies expect to achieve full integration over the ensuing three years, unlocking the benefits of the combination.”

The transaction represents an enterprise value of approximately $31 billion. KCS stockholders will receive 2.884 CP common shares and $90 in cash for each share of KCS common stock held and $37.50 in cash for each share of KCS preferred stock held.

Immediately upon the closing of the acquisition, the shares of KCS were placed into a voting trust with Dave Starling, former KCS president and CEO, appointed as the voting trustee. The voting trust, which ensures KCS will operate independently of CP, will remain in effect until the STB issues its decision on the companies’ joint railroad control application.

“Today is a historic day for our two iconic companies,” said Keith Creel, CP president and chief executive officer. “CPKC will become the backbone connecting our customers to new markets, enhancing competition in the U.S. rail network, and driving economic growth across North America while delivering significant environmental benefits. We are excited to reach this milestone on the path toward creating this unique truly North American railroad.”

“As a board and management team, we are proud of the countless contributions and achievements of all those who work for Kansas City Southern,” said Patrick J. Ottensmeyer, KCS president and chief executive officer. “We are excited for the possibilities that will open to us through this combination with CP and we look forward to our next chapter.”

David Murray can be reached at [email protected].