Kansas City Southern (NYSE: KSU) (“KCS”) today announced the
completion of its sale to Canadian Pacific Railway Limited (TSX:
CP, NYSE: CP) (“CP”). The transaction represents an enterprise
value of approximately USD$31 billion. KCS stockholders will
receive 2.884 CP common shares and $90 in cash for each share of
KCS common stock held and $37.50 in cash for each share of KCS
preferred stock held.
Immediately upon the closing of the acquisition, the shares of
KCS were placed into a voting trust with Dave Starling, former KCS
President and CEO, appointed as the Voting Trustee. The Voting
Trust, which ensures KCS will operate independently of CP, will
remain in effect until the U.S. Surface Transportation Board
(“STB”) issues its decision on the companies’ joint railroad
control application. The STB’s approval of CP’s control of KCS
would create Canadian Pacific Kansas City Limited (“CPKC”), the
only single-line railroad linking the United States, Mexico and
Canada. The STB review of CP’s proposed control of KCS is expected
to be completed in the fourth quarter of 2022.
“Today is a historic day for our two iconic companies,” said
Keith Creel, CP President and Chief Executive Officer. “CPKC will
become the backbone connecting our customers to new markets,
enhancing competition in the U.S. rail network, and driving
economic growth across North America while delivering significant
environmental benefits. We are excited to reach this milestone on
the path toward creating this unique truly North American
railroad.”
“As a Board and management team, we are proud of the countless
contributions and achievements of all those who work for Kansas
City Southern,” said Patrick J. Ottensmeyer, KCS President and
Chief Executive Officer. “We are excited for the possibilities that
will open to us through this combination with CP and we look
forward to our next chapter.”
Expected benefits from the business combination will not be
realized until the STB approves CP’s control of KCS’ railroads.
Upon obtaining control approval from the STB, the two companies
expect to achieve full integration over the ensuing three years,
unlocking the benefits of the combination.
For information on the benefits of a CP-KCS combination, visit
FutureForFreight.com.
Advisors
BMO Capital Markets and Goldman Sachs & Co. LLC are serving
as financial advisors to Canadian Pacific. Sullivan & Cromwell
LLP, Bennett Jones LLP and the Law Office of David L. Meyer are
serving as legal counsel. Creel, García-Cuéllar, Aiza y Enríquez,
S.C. are serving as Mexican legal counsel to Canadian Pacific.
Evercore is serving as the Canadian Pacific Board’s financial
advisors and Blake, Cassels & Graydon LLP is serving as the
Board’s legal counsel.
BofA Securities and Morgan Stanley & Co. LLC are serving as
financial advisors to Kansas City Southern. Wachtell, Lipton, Rosen
& Katz, Baker & Miller PLLC, Davies Ward Phillips &
Vineberg LLP, WilmerHale, and White & Case, S.C. are serving as
legal counsel to Kansas City Southern.
FORWARD LOOKING STATEMENTS AND INFORMATION
This news release includes certain forward looking statements
and forward looking information (collectively, "FLI") to provide
KCS stockholders 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", "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 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 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 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 paid
to KCS stockholders; 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;
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, 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 (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
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.
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version on businesswire.com: https://www.businesswire.com/news/home/20211213006105/en/
For more information, please contact:
Kansas City Southern Media C. Doniele Carlson Tel:
816-983-1372 dcarlson@kcsouthern.com
Investment Community Ashley Thorne Tel: 816-983-1530
athorne@kcsouthern.com
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