It’s official, Canadian Pacific Railway (TSX:CP) has won the protracted battle to acquire Kansas City Southern (NYSE:KSU) and create a rail network that spans North America.
CP Rail secured the victory after rival Canadian National Railway (TSX:CNR) announced that it is giving up its bid to takeover Kansas City Southern.
In a news release, CN Rail said the friendly deal it struck to acquire Kansas City Southern has been formally terminated, clearing the way for CP Rail to prevail in a takeover battle that began at the start of this year.
Kansas City Southern confirmed Wednesday morning that it has entered into a formal agreement to be acquired by CP Rail for $90 U.S. in cash and 2.884 of a CP Rail shares. The deal is still subject to shareholder votes and other approvals, with Kansas City Southern shareholders expected to receive their proceeds from the takeover in the first quarter of 2022.
However, CP Rail said it doesn’t expect to take control of Kansas City Southern’s U.S. rail network until the second half of 2022 after getting the go-ahead from the U.S. Surface Transportation Board. Once that occurs, the combined entity will be renamed “Canadian Pacific Kansas City,” and will retain Calgary as its global headquarters.
Kansas City Southern will pay CN Rail a $700-million U.S. break fee. It will also provide CN Rail with $700-million U.S. to cover the break fee that was previously paid to CP Rail when that company’s original offer to acquire Kansas City Southern was disrupted by CN Rail’s counter offer.
It was CP Rail that initially unveiled its plan for a network that would cover all three North American countries – the U.S., Canada and Mexico. It was later muscled out of the way by CN Rail after the Montreal-based railway wooed Kansas City Southern with a richer offer, triggering the takeover battle.
However, CN Rail’s bid was scuttled last month when the U.S. Surface Transportation Board denied the company’s application for a voting trust that was crucial to the success of its takeover strategy.
