HomeFoodKCS to move forward with CP proposal | 2021-09-16

KCS to move forward with CP proposal | 2021-09-16

CALGARY — After months of back-and-forth negotiations between three of North America’s largest rail corporations, a winner lastly seems to have emerged within the battle to purchase Kansas City Southern (KCS).

Canadian Pacific Railway Ltd. (CP) on Sept. 15 introduced it has entered into an settlement to purchase KCS in a inventory and money transaction representing an enterprise worth of roughly $31 billion, which incorporates the belief of $3.8 billion of excellent KCS debt.

“Our path to this historic agreement only reinforces our conviction in this once-in-a-lifetime partnership,” stated Keith Creel, president and chief government officer of CP. “We are excited to get to work bringing these two railroads together. By combining, we will unlock the full potential of our networks and our people while providing industry-best service for our customers. This perfect end-to-end combination creates the first US-Mexico-Canada rail network with new single-line offerings that will deliver dramatically expanded market reach for CP and KCS customers, provide new competitive transportation options, and support North American economic growth.”

Patrick J. Ottensmeyer, president and CEO of KCS, stated the merged railroad can be in a position to compete “by providing the best value for the transportation dollar.”

“The CP-KCS combination will not only benefit customers, labor partners, and shareholders through new, single-line transportation services, attractive synergies and complementary routes, it will also benefit KCS and our employees by enabling us to become part of a growing and truly North American continental enterprise,” Mr. Ottsensmeyer stated.

In order to move forward with its deal with CP, KCS first had to terminate its proposed merger with Canadian National (CN), a choice with important monetary implications. As a part of the termination settlement, KCS should pay CN $1.4 billion, which features a termination payment of $700 million and a $700 million refund of the payment CN paid for KCS to terminate its deal in May with CP.

KCS and CN appeared on the verge of finishing their very own deal till the Surface Transportation Board (STB) on Aug. 31 issued a unanimous determination rejecting the usage of a voting belief settlement in connection with the proposed transaction between CN and KCS.

CN nonetheless had a number of days to come up with an improved provide for KCS, however in the end determined to agree to an early termination of the match interval offered for within the CN merger settlement. While CN stated it continues to consider {that a} CN-KCS mixture would have enhanced competitors and delivered many different compelling advantages for stakeholders, there have been important modifications to the US regulatory panorama since CN launched its preliminary proposal, which have made finishing any Class I merger a lot much less sure, together with an Executive Order centered on competitors issued by President Biden in July.

“While we are disappointed that we will not be able to deliver the many compelling benefits of this transaction to our stakeholders, the decision to bid for KCS was a bold and strategic move that still resulted in positive outcomes for CN,” stated JJ Ruest, president and chief government officer of CN. “We believe that the decision not to pursue our proposed merger with KCS any further is the right decision for CN as responsible fiduciaries of our shareholders’ interests. CN will continue to pursue profitable growth and opportunities for excellence as a leading Class I railroad, and we look forward to outlining more details on our strategic, operational and financial priorities in the near future.”



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