CP-KCS Outline Merger Timeline, New Name

Canadian Pacific and Kansas City Southern said on Thursday that shareholders of their respective companies will vote on their proposed merger in December.

The two railroads expect regulatory authorities in Mexico to review the merger over the next two to four months.

A merger application will be filed with the U.S. Surface Transportation Board in October and railroad officials are hoping to gain approval by October or November 2022.

The merged company is expected to be named Canadian Pacific Kansas City. It will have U.S. headquarters in Kansas City, but its primary headquarters will be in Calgary.

KCS is expected to be placed into a voting trust in the first quarter of 2022 with former KCS CEO David Starling serving as trustee.

The shareholders of KCS will receive $300 per share in a combination of cash and CP stock, which represents a 34 percent premium to the value of KCS stock price before the CP-KCS merger initially was announced last March. KCS shareholders will own 28 percent of CPKC.

CPKC will be the smallest North American Class 1 system by revenue.

Rail officials envision CPKC having $820 million in annual revenue growth from new traffic opportunities and $180 million in cost and efficiency savings.

KCS CEO Patrick Ottensmeyer said his CP counterpart Keith Creel suggested putting Kansas City into the new railroad’s name and making Kansas City the system’s U.S. headquarters.

Creel will serve as CEO of CPKC and continue to be based in Calgary.

He expects some shippers and Class I railroads will ask the STB for concessions as part of the merger review process but doesn’t expect there to be as many as have been granted in previous Class I mergers because the CP-KCS combination does not involve significant route overlap or a reduction in railroad options for some shippers.

Creel also said CPKC will keep all existing gateways and interchanges open as it seeks traffic growth, but added, “I’m not here to go to war with UP (Union Pacific) or BNSF or CN (Canadian National) or CSX or NS (Norfolk Southern).”

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