CP Rail said Wednesday it has reached a deal to acquire KCS for approximately
The news came after KCS on Sunday ruled the bid by CP Rail was a superior proposal to its deal with CN.
CP Rail said the "once-in-a-lifetime partnership" will create the first
"(The merger) will deliver dramatically expanded market reach for CP and KCS customers, provide new competitive transportation options, and support North American economic growth," CP chief executive
CP Rail has said customers will not experience a reduction in railroad choice as a result of the transaction and has pledged to keep all existing freight rail gateways open on "commercially reasonable terms."
Following final regulatory approval expected in the second half of next year, Creel will serve as CEO of the combined company. The combined entity will be named Canadian Pacific Kansas City (CPKC).
“The CP-KCS combination will not only benefit customers, labour 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,” he said in a news release.
While the new railway will remain the smallest of six large railways operating in the
CP Rail's offer, which includes the assumption of
Following the closing into a voting trust, common shareholders of KCS will receive 2.884 CP Rail shares and
CP Rail said the deal will be accretive to its earnings in the first year an is expected to create annualized savings of about
To fund the stock consideration of the merger, it will issue 262 million new shares. The cash portion will be funded through a combination of cash-on-hand and about
The trust allows KCS shareholders to be paid before the
KCS shareholders would own 28 per cent of CP's common shares after the trust is expected to close in the first quarter of 2022.
Under its agreement with KCS, CN said the
CN says it continues to believe that a combination with KCS would have enhanced competition and delivered many other compelling benefits for stakeholders. But it said there have been significant changes to the
“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 CEO
"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..
It vowed to participate in the review of the CP-KCS combination to ensure that "all regulatory rules are enforced fairly, and customers do not suffer anticompetitive effects."
Despite walking away with
The British-based fund said it intends to ask for a special meeting of CN Rail shareholders for the purpose of "refreshing'' the railway's board by adding four members that it has nominated.
The fund, which is also the largest shareholder of
"While CN ultimately made the right decision to not continue its ill-fated pursuit of
"Without much needed change on the board and in management, TCI believes the company’s operational and financial performance will continue to suffer to the detriment of CN shareholders. It is imperative that shareholders have a timely opportunity to vote on TCI’s proposals to put the company on a path to success."
This report by
Companies in this story: (TSX:CNR, TSX:CP)
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