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CP Makes New Offer to Acquire KCS

In a move that will escalate bidding war with CN, new proposal represents enterprise value of $31B

Photo: Canadian Pacific Railroad
Photo: Canadian Pacific Railroad

Canadian Pacific Railway Ltd. has submitted a proposal to acquire Kansas City Southern (KCS) in a stock and cash transaction representing an enterprise value of approximately $31 billion, offering KCS stockholders an alternative recognizing the premium value of KCS while providing more regulatory certainty, says the company.

In May, competing railway CN entered into a definitive merger agreement with KCS.

The proposed CP-KCS transaction, which has the unanimous support of the CP board of directors, values KCS at $300 per share, representing a 34% premium, based on the CP closing price on August 9, 2021 and KCS unaffected closing price on March 19, 2021.

Following the closing into a voting trust, common shareholders of KCS will receive 2.884 CP common shares and $90 in cash for each share of KCS common stock held. The proposed transaction includes the assumption of $3.8 billion of outstanding KCS debt.

This proposal represents improved terms to those agreed to in the CP-KCS merger agreement entered into on March 21, 2021 that are substantially similar to those in the CN merger agreement, but offers significantly higher regulatory certainty than the proposed CN merger and significantly higher value than the previously agreed combination.

According to CP, a CP-KCS combination would enhance competition, create new and stronger competitive single-line options against existing single-line routes while taking trucks off the highway.

"A CP-KCS combination would maintain all existing freight rail gateways and maintain competition in the Baton Rouge to New Orleans corridor, while creating new north-south lanes between Western Canada, the Upper Midwest and the Gulf Coast and Mexico," the company said in a statement.

CP also states it's willing to host intercity passenger rail service between New Orleans and Baton Rouge, an outcome with far more operational flexibility and less risk to Louisiana taxpayers.

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About Canadian Pacific
Canadian Pacific is a transcontinental railway in Canada and the United States with direct links to major ports on the west and east coasts.

About Kansas City Southern
Headquartered in Kansas City, MO, Kansas City Southern is a transportation holding company that has railroad investments in the U.S., Mexico and Panama.

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