News & Reviews News Wire Canadian Pacific announces deal to buy Kansas City Southern (Updated)

Canadian Pacific announces deal to buy Kansas City Southern (Updated)

By | March 20, 2021

CP says deal, worth $29 billion, should be completed in 2022

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Canadian Pacific Railway beaver logo

Canadian Pacific Railway beaver logoCALGARY — Canadian Pacific will buy Kansas City Southern in a cash and stock transaction worth approximately $29 billion, CP has confirmed. Financial Times first reported the story Saturday night.

In an announcement posted Sunday morning, CP said the deal has the approval of both boards of directors, and confirms the previously reported price valuing KCS at $275 per share, representing a 23% premium on KCS’s closing stock price on Friday.

“This transaction will be transformative for North Kansas City Southern Lines logoAmerica, providing significant positive impacts for our respective employees, customers, communities, and shareholders,” CP CEO Keith Creel said in the announcement. “This will create the first U.S.-Mexico-Canada railroad, bringing together two railroads that have been keenly focused on providing quality service to their customers to unlock the full potential of their networks. CP and KCS have been the two best performing Class 1 railroads for the past three years on a revenue growth basis.”

The two railroads connect at just one point — Kansas City, Mo., where they have an existing shared facility. The combination will create a system of about 16,400 miles — and operate about 20,000 miles, including trackage and haulage rights — while employing about 20,000 people. It will be the smallest of the six remaining Class I U.S. railroads by revenue, generating revenue of about $8.7 billion based on 2020 figures.

“In combining with CP, customers will have access to new, single-line transportation services that will provide them with the best value for their transportation dollar and a strong competitive alternative to the larger Class Is,” KCS CEO Patrick J. Ottensmeyer said in the announcement. “…Importantly, KCS employees will benefit from being part of a truly North American continental enterprise, which creates a strong platform for revenue growth, capital investment, and future job creation. Customers, labor partners, and shareholders will all benefit from the inherent strengths of this combination, including attractive synergies and complementary routes.”

The deal will require approval by the U.S. Surface Transportation Board. The transaction will be a two-step process. First, CP will create an independent voting trust to acquire the KCS shares, which is expected to occur in the second half of 2021. Second will come approval from the STB and other regulatory authorities. CP says that is expected to occur by the middle of 2022.

— This is a developing story. Watch Trains News Wire later today for additional coverage.

21 thoughts on “Canadian Pacific announces deal to buy Kansas City Southern (Updated)

  1. but what will the governments and congress of the United States, Canada, and Mexico think of the idea of the merger ?

  2. With so much Canadian and Bakken oil headed to the petro coast and with Biden cancelling the pipeline, this deal makes sense. When CN and CP signed all of those oil transport deals with the tar sand suppliers everyone was asking how CP was going to get it there. What is funny is with CN and CP embracing hydrogen/fuel cell powered rail, we will have “green” pulling black soup to Texas now. Who knew?

    1. JOHN RICE —– I’m quite confident the Biden/ Harris dictatorship will find a way to block petroleum shipments by rail. Bet on it.

    1. I don’t see why. CN+KCS has no overlap with NS. PAS is the burr under the saddle for NS with CSX+PAR. And of course, NS and CSX overlap extensively all across their systems.

      The next big question has got to be: When will unions of BNSF and UP in the west, and CSX and NS in the east fall into place to effect America’s first true transcons? And how will that effect CN and CP?

      Clearly CP is anticipating the eventuality by grabbing KCS in an effort to make themselves a truly continental railroad.

      And, with that in mind how will the two new American transcons divide the Mexican railroads that are left? I see the two new future transcons dividing up of jointly buying Ferromex.

      This is getting interesting.

  3. A smart business move perhaps but I hate to see a strong regional railroad like KCS get absorbed. Jobs will be lost, local service will suffer, and ties to the local economy will disappear.

  4. Another American company being taken over by foreign interests. When will our Government ever step up and put a stop to foreign majority ownership on our soil? Most industrial nations around the world don’t allow it to happen!

    1. Really Ray? All successful industries are global. Look at Stellantis – major manufacturing in USA, Mexico, Canada, Italy, England, France, Germany …. and so on across all industries. In America we have foreign-owned plants of Hyundai/Kia, Toyota, Subaru, Daimler, Honda, Airbus etc. etc. etc. etc. Actually most governments DO allow foreign ownership. Those that don’t are dirt poor.

      I live in Wisconsin. Our two major railroads are the two Canadian carriers. We’re fine. All is well.

    2. Ray, just the other day the government and auto industry announced the need to invest heavily into the Canadian copper, cobalt and other mining industries to assist in the development of home grown supplies for the EV industry, instead of relying on Asia. Working together with one’s neighbours is generally beneficial.
      You cannot have it both ways.

  5. Obvious after CN purchased ICRR. Wonder what took so long????

    I’m not familiar with track layout at KCMO so I don’t know how the connection would work.

    1. According to my Railroad Atlas, they meet end-to-end at a junction just north of the Sheffield flyover, and there are two joint yards west of that junction. Also, it appears to be outside of the jurisdiction of Kansas City Terminal, which means they won’t have to deal with handing their trains over to a third party. Theoretically, a through freight would be able to bypass the yards and continue on home rails the whole way through.

    1. KCS already said ‘yes’ t CP. Both boards agreed. 25% per share premium being paiud by CP. Why say ‘no’?

  6. This is probably the only merger among the seven Class 1’s with a chance of getting approved without violating the FRA’s “no merger” policy.

  7. I wonder if CN will ask for concessions in return for not opposing this deal? I’m thinking it could get the former Gateway Western Railway Kansas City-St. Louis/Springfield lines.

    1. I think that not only CN but every one will want concessions, in my opinion, mainly BNSF and UP.

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