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Combining CN and Kansas City Southern Railway LLC

CN and KCS would make a leading railway for the 21st century that seamlessly connects ports and rails across North America. The new single-line railway would increase the reach of customers and divert traffic away from crowded highways, and cut down on greenhouse gas emission.

The STB must approve the merger. If approved, CP would acquire control of KCS. The combined network will be operated as Canadian Pacific Kansas City Southern.

History

CALGARY, Alberta & KANSAS CITY, Missouri--(BUSINESS WIRE)--Canadian Pacific Railway Limited (TSX: CP; NYSE: CP) and Kansas City Southern Railway LLC today announced that they have entered into an agreement to join their networks. The combination will create an extensive North American rail network connecting Canada as well as the U.S. Midwest and Mexico. CP will acquire KCS for $29 billion in stock and cash following the Surface Transportation Board approves it.

In 1889, Arthur Stilwell started construction on the first section of what would eventually become the Kansas City, Pittsburg & Gulf Railroad. His aim was to construct an easy route that would connect the Midwest with the Gulf of Mexico tidewater. The railroad was a crucial link in the transport of Midwestern grain to the ports of Louisiana and Texas.

After an era of diversification, KCS was in desperate need of capital in order to invest in maintenance of its tracks and modernize its fleet of locomotives. The railroad turned to the Amsterdam capital markets for funding. Utilizing previously undiscovered archive materials, Dr. Veenendaal tells the fascinating story of Dutch financiers helping KCS overcome its difficulties and unlock its full potential.

Service Area

The companies have said they anticipate the combination to provide new single-line routes for grain transport increasing the network's market coverage and allowing for more competitive transportation options. They also expect to increase efficiency and reduce emissions by diverting traffic from the crowded U.S. roads to rail which is where trucks are more fuel efficient and produce less carbon dioxide.

Canadian Pacific and Kansas City Southern are expected to conclude the transaction by 2022, subject to regulatory approvals. The deal is the largest railroad combination in North America and stands to benefit from an increase in trade following disruptions caused by the COVID-19 pandemic as well as acceptance of the US-Mexico Canada Agreement.

Mark Creel, CP's Chief executive officer, will head CPKC should it be approved. Calgary will serve as the global headquarters of the entity with Kansas City serving as its U.S. headquarters and Mexico headquarters in Mexico City and Monterrey, the company announced. Four KCS directors will join the expanded board of CP to bring their expertise and experience overseeing the company's multinational operations.

The deal is being proposed in accordance with the regulations of Canada's Competition Act and the U.S. The companies claimed that Surface Transportation Board merger regulations were in place before 2001. The merger is subject to the approval of both CN and KCS shareholders in addition to other closing conditions that are customary to the industry.

Operations

Our team is dedicated to providing reliable and cost-effective transportation services that are cost-effective and reliable. We aim to provide exceptional level service to our clients while ensuring the safety of our employees and increasing their engagement. We are always striving to improve our operations using technology and technological advancement. For example, KCSM has deployed the CloudMoyo crew management solution to streamline the supply of train staff and demand matching based upon various criteria including crew availability and skills as well as experience. This allows for an efficient operation with lower labor costs, and more strict compliance with Mexico's labour laws.

KCSM is committed to providing resources to help employees learn and grow in their jobs. In the classroom, online or on the job, there are a variety of training and professional development options to improve leadership, technical and job-specific capabilities. Additionally, a variety of employee wellness programs are offered to encourage healthy lifestyles and encourage a safe workplace.

In 2021 the Surface Transportation Board (STB) approved Canadian Pacific Railway's plan to buy Kansas City Southern in a cash and stock deal with an enterprise value of around USD$29 billion1. The combined company will be the first single line railway to connect Canada, United States and Mexico. It will provide superior service, enhanced capabilities and a fresh market access.

Assets

Under Haverty's direction, the railroad began to acquire key strategic lines that would enable it to compete with contemporary competitors in Class I. The New Orleans to Shreveport and in 2006, the Texas Mexican Railway were among the lines. They bridged the gap between KCS older U.S. lines and KCSM and facilitated access to Mexico's western coast ports. In addition, the company acquired an interest in the Panama Canal Railway, which offers a faster and less expensive alternative to shipping through the Canal for containers and general traffic.

Haverty was also responsible for the development of an intermodal hub the highest quality in Kansas City, Mo. The facility provides direct access to global markets through the heartland of North America. It also provides a variety of services, including transloading services and truck loading and offloading services.

In 2021, Canadian National Railway Company (CN) announced plans to join KCS to form the leading North American rail network of the 21st century, enhancing customer choice and railway competitiveness by connecting major industrial cities in Canada, Mexico and the United States with the fastest and most efficient routes to those destinations. The network will help reduce congestion on U.S. highways, and reduce emissions. This is a win-win for shippers.

The transaction is subject to approval by the U.S. Surface Transportation Board will pay KCS shareholders a significant premium, greater than twice the cash they will receive for their shares of the combined company. CN anticipates that the transaction will be immediately accretive to adjusted earnings per share after diluted.