CP reviewing details of 212-page decision
authorizing control of KCS on or after April
14
CALGARY,
AB and KANSAS CITY,
MO, March 15, 2023 /PRNewswire/ - Canadian
Pacific (TSX: CP) (NYSE: CP) ("CP") and Kansas City Southern
("KCS") said today the U.S. Surface Transportation Board ("STB")
issued a decision approving the CP and KCS joint merger
application, subject to certain conditions, thereby authorizing the
two railways to combine to form Canadian Pacific Kansas City
("CPKC"), the first single-line railway connecting the U.S.,
Mexico and Canada.
The decision authorizes CP to exercise control of KCS as early
as April 14, 2023, at or after which
point CP and KCS would combine to create the new CPKC. CP is
reviewing the full 212-page decision in detail and in the coming
days will announce its plans with respect to the creation of
CPKC.
CP President and Chief Executive Officer Keith Creel extended the company's sincere
gratitude to the STB board and staff for their hard work as part of
the comprehensive review of the combination.
"This decision clearly recognizes the many benefits of this
historic combination," Creel said. "As the STB found, it will
stimulate new competition, create jobs, lead to new investment in
our rail network, and drive economic growth.
"These benefits are unparalleled for our employees, rail
customers, communities and the North American economy at a time
when the supply chains of these three great nations have never
needed it more," Creel added. "A combined CPKC will connect
North America through a unique
rail network able to enhance competition, provide improved reliable
rail service, take trucks off public roads and improve rail safety
by expanding CP's industry-leading safety practices."
"This important milestone is the catalyst for realizing the
benefits of a North American railroad for all of our stakeholders,"
said Patrick J. Ottensmeyer, KCS
President and Chief Executive Officer. "The KCS Board of Directors
and management team are very proud of the many contributions and
achievements of the people who have made KCS what it is today and
we are excited for the boundless possibilities as we move forward
into the next chapter as CPKC."
CPKC will bring a new standard of safety to the North American
rail landscape. CP has been the safest railroad in North America for 17 straight years as
measured by the Federal Railroad Administration train accident
frequency ratio. In 2022, CP had an all-time best frequency of
0.93, a rate nearly half what the company produced a decade ago and
69 percent lower than the Class 1 average.
CP's culture of safety, supported by its history of sustained
investments in core infrastructure and technology, aligns with
KCS's likeminded culture, allowing the combined system to operate
at the apex of rail safety. CPKC will implement the combination
with safety at the forefront of everything it does.
Among the core conclusions reached by the STB regarding the
public and pro-competitive benefits of the CP-KCS
combination, including that the combination "should ultimately
enhance safety and benefit the environment":
"The Board expects that this new single-line service will foster
the growth of rail traffic, shifting approximately 64,000
truckloads annually from North
America's roads to rail, and will support investment in
infrastructure, service quality, and safety," the board said in its
decision, going on to say, "Indeed, approval of this transaction
may even enhance safety for the nation as a whole" and that "thus,
any rail traffic diverted to CPKC from other railroads will likely
mean traffic moving to a railroad with a better safety record."
"The transaction is also expected to drive employment growth
across the CPKC system, adding over 800 new union-represented
operating positions in the United
States," the board continued. "Of additional importance, the
merger will foster new National Railroad Passenger Corporation
(Amtrak) passenger rail opportunities, as Applicants have committed
to support Amtrak's existing plans for expanded service on the new
railroad's lines."
"This transaction is "end-to-end," meaning that there are little
to no track redundancies or overlapping routes. If consummated, it
will reduce travel time for traffic moving over the single line
service; it should result in increased incentives for investment;
and it will eliminate the need for the two now-separate CP and KCS
systems to interchange traffic moving from one system to the other.
This will enhance efficiency, which in turn will enable the new
CPKC system to better compete for traffic with the other larger
Class I carriers," the decision says.
The board concluded, "The Transaction will make possible
improved single-line service for many shippers and will result in
merger synergies that are likely to allow CPKC to be a vigorous
competitor to other Class Is by providing improved service at lower
cost."
CP completed its US$31 billion
acquisition of KCS on Dec. 14, 2021.
Immediately upon the closing of that acquisition, shares of KCS
were placed into a voting trust with Dave
Starling, former KCS President and CEO, appointed as the
trustee. Upon Mr. Starling's death, Ronald
L. Batory was appointed as successor trustee with the STB's
approval. The Voting Trust has ensured that KCS operates
independently of CP during the regulatory review process, and until
CP exercises control pursuant to the STB decision, CP and KCS will
continue to operate independently.
Headquartered in Calgary,
Alta., Canada, CPKC would
be the first railway connecting North
America. While remaining the smallest of six U.S. Class 1
railroads by revenue, the combined company will have a much larger
and more competitive network, operating approximately 20,000 miles
of rail, employing close to 20,000 people. Once combined, full
integration of CP and KCS is expected to happen over the next three
years, unlocking the benefits of the combination.
Forward looking information
This news release contains certain forward looking statements and
forward looking information (collectively, "FLI") to provide CP
shareholders and potential investors with information about CP, KCS
and their respective subsidiaries and affiliates, which FLI may not
be appropriate for other purposes. FLI is typically identified by
words such as "anticipate", "expect", "project", "estimate",
"forecast", "plan", "intend", "will", "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 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 FLI, including, but
not limited to, the following: the realization of anticipated
benefits and synergies of the CP-KCS transaction and the timing
thereof; the success of integration plans; the focus of management
time and attention on the CP-KCS transaction and other disruptions
arising from the CP-KCS 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; the ability of
management of CP, its subsidiaries and affiliates to execute key
priorities, including those in connection with the CP-KCS
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;
ability to achieve commitments and aspirations relating to reducing
greenhouse gas emissions and other climate-related objectives;
anticipated in-service dates; success of hedging activities;
operational performance and reliability; customer 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 events, 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 with Canadian and U.S. securities
regulators, including any prospectus, material change report,
management information circular or registration statement that have
been or will 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 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 (TSX: CP)
(NYSE: CP) 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
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SOURCE Canadian Pacific