CALGARY, AB and
KANSAS CITY, Mo., Oct. 29, 2021 /CNW/ - Canadian Pacific
Railway Limited (TSX: CP) (NYSE: CP) ("CP") and Kansas City
Southern (NYSE: KSU) ("KCS") today announced they have jointly
filed a railroad control application with the Surface
Transportation Board ("STB") regarding the proposed transaction to
create Canadian Pacific Kansas City ("CPKC"), the only single-line
railroad linking the United
States, Mexico and
Canada.
"We are excited to file our joint application for this unique,
pro-competitive combination and once-in-a-lifetime partnership,"
said Keith Creel, CP President and
Chief Executive Officer. "CPKC is an extraordinary opportunity to
inject new competition and new capacity into the U.S. rail network,
further USMCA trade flows, improve safety, grow employment and
facilitate new passenger services. We are ready to work with the
STB as the board gives this transaction a thorough and appropriate
review, and ultimately look forward to approval so we can get to
work delivering these benefits to the North American economy."
"We are pleased to submit this application together and take
another important step toward bringing to fruition this historic
opportunity for CP and KCS," said Patrick
J. Ottensmeyer, KCS President and Chief Executive Officer.
"In fierce competition with other railroads, trucks and other modes
of transportation, CPKC will provide new routes, reach broader
markets and create expanded shipping opportunities for customers.
This combination will also unlock new infrastructure investment and
environmentally-friendly supply chain transportation options that
will grow the USMCA economy."
The comprehensive control application provides an overview of
the proposed operational integration of the CP and KCS rail
networks, the impact of that consolidation on the companies'
finances and labour needs, and the anticipated competitive and
other benefits that will flow from providing shippers with new and
better transportation alternatives. Information in the filing
outlines the public and customer benefits a CP-KCS combination
would bring, including more efficient north-south trade arteries to
support the interconnected supply chains of the United States, Mexico and Canada.
In addition to the central foundation of the transaction to
invigorate transportation competition and support economic growth
across North America, the CP-KCS
combination will generate many other public benefits,
including:
- The creation of more than 1,000 direct new jobs system-wide,
including approximately 760 in the United
States, over the next three years brought about by expanded
rail operations across the combined network.
- Capital investments in new infrastructure of more than
USD$275 million1 over the
next three years to improve rail safety and capacity of the core
north-south CPKC main line between Louisiana and the Upper Midwest.
- Avoidance of more than 1.5 million tons of greenhouse gas (GHG)
emissions within five years due to the improved efficiency of CPKC
versus current operations.
- Diverting 64,000 long-haul truck shipments to rail annually
with new CPKC intermodal services, eliminating another 1.3 million
tons of GHG emissions over the next two decades, saving
$750 million in highway maintenance
costs.
Rail customers will not experience a reduction in independent
railroad choices as a result of the CP-KCS combination. The joint
control application reiterates the applicants' commitment to keep
all existing freight rail gateways open on commercially reasonable
terms, including the Laredo
gateway between the United States
and Mexico, and shows how
customers will not lose competitive routings because no new
regulatory "bottlenecks" are being created. It also describes how
the combined company will compete aggressively to attract traffic
to its network via new single-line lanes between Canada, the Upper Midwest and the Gulf Coast,
Texas, and Mexico.
More than 960 stakeholders, including more than 440 shippers,
186 smaller railroads, dozens of public officials, eight major
ports, railroad labor unions representing both CP and KCS employees
and 289 rail industry suppliers have written letters to the STB
supporting CP's proposed combination with KCS.
CP has agreed to acquire KCS in a stock and cash transaction
representing an enterprise value of approximately $31 billion, which includes the assumption of
$3.8 billion of outstanding KCS debt.
The transaction, which has the unanimous support of both boards of
directors, values KCS at $300 per
share, representing a 34 percent premium, based on the CP closing
price on Aug. 9, 2021, the date prior
to which CP submitted a revised offer to acquire KCS, and KCS'
unaffected closing price on March 19,
2021.2
The transaction is subject to approval by shareholders of each
company along with satisfaction of customary closing conditions,
including Mexican regulatory approvals. Shareholders are expected
to vote on the transaction later this year.
CP's ultimate acquisition of control of KCS' U.S. railways is
subject to the approval of the STB. In April
2021, the STB determined it would review the CP-KCS
combination under the merger rules in existence prior to 2001 and
the waiver granted to KCS in 2001 to exempt it from the 2001 merger
rules. In August 2021, the STB
reaffirmed that the pre-2001 rules would govern its review of the
CP-KCS transaction. On Sept. 30,
2021, the STB confirmed that it has approved the use of a
voting trust for the CP-KCS combination.
____________________
|
1 Except
where noted, all figures are in U.S. dollars.
|
2 Based on
KCS closing share price of $224.16 as of March 19, 2021 and CP
closing share price of CAD$91.50 (at 1.2565 FX rate) as of Aug. 9,
2021.
|
The STB review of CP's proposed control of KCS is expected to be
completed in the second half of 2022. Upon obtaining control
approval, the two companies will be integrated fully over the
ensuing three years, unlocking the benefits of the combination.
While remaining the smallest of six U.S. Class 1 railroads by
revenue, the combined company would have a much larger and more
competitive network, operating approximately 20,000 miles of rail,
employing close to 20,000 people, and generating total revenues of
approximately $8.7 billion based on
2020 actual revenues.
For more information about the benefits of the CP-KCS
combination, visit futureforfreight.com.
FORWARD LOOKING STATEMENTS AND INFORMATION
This news release includes certain forward looking statements
and forward looking information (collectively, FLI) to provide CP
and KCS shareholders and potential investors with information about
CP, KCS and their respective subsidiaries and affiliates, including
each company's management's respective assessment of CP, KCS and
their respective subsidiaries' future plans and operations, which
FLI may not be appropriate for other purposes. FLI is typically
identified by words such as "anticipate", "expect", "project",
"estimate", "forecast", "plan", "intend", "target", "believe",
"likely" and similar words suggesting future outcomes or statements
regarding an outlook. All statements other than statements of
historical fact may be FLI.
Although we believe that the FLI is reasonable based on the
information available today and processes used to prepare it, such
statements are not guarantees of future performance and you are
cautioned against placing undue reliance on FLI. By its nature, FLI
involves a variety of assumptions, which are based upon factors
that may be difficult to predict and that may involve known and
unknown risks and uncertainties and other factors which may cause
actual results, levels of activity and achievements to differ
materially from those expressed or implied by these FLI, including,
but not limited to, the following: the timing and completion of the
transaction, including receipt of regulatory and shareholder
approvals and the satisfaction of other conditions precedent;
interloper risk; the realization of anticipated benefits and
synergies of the transaction and the timing thereof; the success of
integration plans; the focus of management time and attention on
the transaction and other disruptions arising from the transaction;
changes in business strategy and strategic opportunities; estimated
future dividends; financial strength and flexibility; debt and
equity market conditions, including the ability to access capital
markets on favourable terms or at all; cost of debt and equity
capital; potential changes in the CP share price which may
negatively impact the value of consideration offered to KCS
shareholders; the ability of management of CP, its subsidiaries and
affiliates to execute key priorities, including those in connection
with the transaction; general Canadian, U.S., Mexican and global
social, economic, political, credit and business conditions; risks
associated with agricultural production such as weather conditions
and insect populations; the availability and price of energy
commodities; the effects of competition and pricing pressures,
including competition from other rail carriers, trucking companies
and maritime shippers in Canada,
the U.S. and Mexico; North
American and global economic growth; industry capacity; shifts in
market demand; changes in commodity prices and commodity demand;
uncertainty surrounding timing and volumes of commodities being
shipped; inflation; geopolitical instability; changes in laws,
regulations and government policies, including regulation of rates;
changes in taxes and tax rates; potential increases in maintenance
and operating costs; changes in fuel prices; disruption in fuel
supplies; uncertainties of investigations, proceedings or other
types of claims and litigation; compliance with environmental
regulations; labour disputes; changes in labour costs and labour
difficulties; risks and liabilities arising from derailments;
transportation of dangerous goods; timing of completion of capital
and maintenance projects; sufficiency of budgeted capital
expenditures in carrying out business plans; services and
infrastructure; the satisfaction by third parties of their
obligations; currency and interest rate fluctuations; exchange
rates; effects of changes in market conditions and discount rates
on the financial position of pension plans and investments; trade
restrictions or other changes to international trade arrangements;
the effects of current and future multinational trade agreements on
the level of trade among Canada,
the U.S. and Mexico; climate
change and the market and regulatory responses to climate change;
anticipated in-service dates; success of hedging activities;
operational performance and reliability; customer, shareholder,
regulatory and other stakeholder approvals and support; regulatory
and legislative decisions and actions; the adverse impact of any
termination or revocation by the Mexican government of Kansas City
Southern de Mexico, S.A. de C.V.'s
Concession; public opinion; various events that could disrupt
operations, including severe weather, such as droughts, floods,
avalanches and earthquakes, and cybersecurity attacks, as well as
security threats and governmental response to them, and
technological changes; acts of terrorism, war or other acts of
violence or crime or risk of such activities; insurance coverage
limitations; material adverse changes in economic and industry
conditions, including the availability of short and long-term
financing; and the pandemic created by the outbreak of COVID-19 and
its variants, and resulting effects on economic conditions, the
demand environment for logistics requirements and energy prices,
restrictions imposed by public health authorities or governments,
fiscal and monetary policy responses by governments and financial
institutions, and disruptions to global supply chains.
We caution that the foregoing list of factors is not exhaustive
and is made as of the date hereof. Additional information about
these and other assumptions, risks and uncertainties can be found
in reports and filings by CP and KCS with Canadian and U.S.
securities regulators, including any proxy statement, prospectus,
material change report, management information circular or
registration statement to be filed in connection with the
transaction. Reference should be made to "Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and
Results of Operations—Forward Looking Statements" in CP's and KCS's
annual and interim reports on Form 10-K and 10-Q. Due to the
interdependencies and correlation of these factors, as well as
other factors, the impact of any one assumption, risk or
uncertainty on FLI cannot be determined with certainty.
Except to the extent required by law, we assume no obligation to
publicly update or revise any FLI, whether as a result of new
information, future events or otherwise. All FLI in this news
release is expressly qualified in its entirety by these cautionary
statements.
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. CP provides North American customers a competitive
rail service with access to key markets in every corner of the
globe. CP is growing with its customers, offering a suite of
freight transportation services, logistics solutions and supply
chain expertise. Visit www.cpr.ca to see the rail advantages
of CP. CP-IR
ABOUT KCS
Headquartered in Kansas City,
Mo., Kansas City Southern (KCS) (NYSE: KSU) is a
transportation holding company that has railroad investments in the
U.S., Mexico and Panama. Its primary U.S. holding is The Kansas
City Southern Railway Company, serving the central and south
central U.S. Its international holdings include Kansas City
Southern de Mexico, S.A. de C.V.,
serving northeastern and central Mexico and the port cities of Lázaro Cárdenas,
Tampico and Veracruz, and a 50 percent interest in
Panama Canal Railway Company,
providing ocean-to-ocean freight and passenger service along the
Panama Canal. KCS' North American rail holdings and strategic
alliances with other North American rail partners are primary
components of a unique railway system, linking the commercial and
industrial centers of the U.S., Mexico and Canada. More information about KCS can be
found at www.kcsouthern.com.
ADDITIONAL INFORMATION ABOUT THE TRANSACTION AND WHERE TO
FIND IT
CP has filed with the U.S. Securities and Exchange
Commission (SEC) a registration statement on Form F-4, which
includes a proxy statement of KCS that also constitutes a
prospectus of CP, and any other documents in connection with the
transaction. The registration statement has not yet become
effective. When finalized, the definitive proxy
statement/prospectus will be sent to the stockholders of KCS. CP
will also file a management proxy circular in connection with the
transaction with applicable securities regulators in Canada and the management proxy circular will
be sent to CP shareholders. INVESTORS, STOCKHOLDERS AND
SHAREHOLDERS OF KCS AND CP ARE URGED TO READ THE REGISTRATION
STATEMENT, THE PRELIMINARY PROXY STATEMENT/PROSPECTUS AND
MANAGEMENT PROXY CIRCULAR, AS APPLICABLE, AND ANY OTHER DOCUMENTS
FILED OR TO BE FILED WITH THE SEC OR APPLICABLE SECURITIES
REGULATORS IN CANADA IN CONNECTION
WITH THE TRANSACTION WHEN THEY BECOME AVAILABLE (INCLUDING ANY
AMENDMENTS AND SUPPLEMENTS THERETO), AS THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT KCS, CP, THE TRANSACTION AND RELATED MATTERS. The
registration statement and proxy statement/prospectus and other
documents filed by CP and KCS with the SEC, when filed,
will be available free of charge at the SEC's website at
www.sec.gov. In addition, investors and shareholders will be able
to obtain free copies of the registration statement, proxy
statement/prospectus, management proxy circular and other documents
which will be filed with the SEC and applicable securities
regulators in Canada by
CP online at investor.cpr.ca and www.sedar.com, upon written
request delivered to CP at 7550 Ogden Dale Road S.E.,
Calgary, Alberta, T2C 4X9,
Attention: Office of the Corporate Secretary, or by calling
CP at 1-403-319-7000, and will be able to obtain free copies
of the proxy statement/prospectus and other documents filed with
the SEC by KCS online at www.investors.kcsouthern.com, upon
written request delivered to KCS at 427 West 12th Street,
Kansas City, Missouri 64105,
Attention: Corporate Secretary, or by calling KCS's Corporate
Secretary's Office by telephone at 1-888-800-3690 or by email at
corpsec@kcsouthern.com.
You may also read and copy any reports, statements and other
information filed by KCS and CP with the SEC at the SEC
public reference room at 100 F Street N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at
1-800-732-0330 or visit the SEC's website for further information
on its public reference room. This news release shall not
constitute an offer to sell or the solicitation of an offer to buy
any securities, nor shall there be any sale of securities in any
jurisdiction in which such offer, solicitation or sale would be
unlawful prior to appropriate registration or qualification under
the securities laws of such jurisdiction. No offering of securities
shall be made except by means of a prospectus meeting the
requirements of Section 10 of the U.S. Securities Act of 1933, as
amended.
PARTICIPANTS IN THE SOLICITATION OF PROXIES
This news release is not a solicitation of proxies in connection
with the transaction. However, under SEC rules, CP, KCS, and
certain of their respective directors and executive officers may be
deemed to be participants in the solicitation of proxies in
connection with the transaction. Information about CP's directors
and executive officers may be found in its 2021 Management Proxy
Circular, dated March 10, 2021, as
well as its 2020 Annual Report on Form 10-K filed with the SEC and
applicable securities regulators in Canada on February 18,
2021, available on its website at investor.cpr.ca and at
www.sedar.com and www.sec.gov. Information about KCS's directors
and executive officers may be found on its website at
www.kcsouthern.com and in its 2020 Annual Report on Form 10-K filed
with the SEC on January 29, 2021,
available at www.investors.kcsouthern.com and www.sec.gov. These
documents can be obtained free of charge from the sources
indicated above. Additional information regarding the interests of
such potential participants in the solicitation of proxies in
connection with the transaction will be included in the proxy
statement/prospectus and management proxy circular and other
relevant materials filed with the SEC and applicable securities
regulators in Canada when they
become available.
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SOURCE Canadian Pacific