Kansas City Southern Merger Agreement
On May 21, 2021, the proposed merger agreement between Canadian National Railway (CN) and Kansas City Southern (KCS) was announced, which would create the first railroad connecting Canada, the United States, and Mexico. The deal, worth approximately $33.6 billion, includes the assumption of $3.8 billion of KCS` outstanding debt.
The merger agreement between CN and KCS is a historic milestone in the transportation industry, as it would connect the north and south American rail systems for the first time, providing customers with a seamless, integrated network. Furthermore, the combination of CN and KCS would create a robust North American network that would offer unmatched access to essential markets and new opportunities for customers across the three countries.
Under the terms of the merger agreement, KCS shareholders would receive $320 in cash and 1.129 shares of CN common stock for each KCS common share, which represents a total value of $325 per share. Importantly, the cash and stock consideration would be subject to a collar mechanism, which means that if the value of CN`s shares falls below a certain threshold, KCS shareholders would receive a higher cash consideration.
The merger agreement between CN and KCS is subject to the approval of KCS shareholders and regulatory authorities, including the Surface Transportation Board (STB) in the United States and the Federal Competition Commission (COFECE) in Mexico. The STB has previously approved KCS` proposed merger with another transportation company, Canadian Pacific Railway (CP), but the CN-KCS merger agreement is expected to face more significant regulatory scrutiny.
CN and KCS have stated that they are confident that their proposal will receive regulatory approval, citing the significant benefits it would offer customers and the positive impact it would have on the North American economy. The companies expect the transaction to close in the second half of 2022.
In conclusion, the proposed merger agreement between CN and KCS is a significant development in the transportation industry, with the potential to create a North American rail network that would provide unparalleled opportunities for customers. While the deal is still subject to regulatory approval, it is clear that CN and KCS see this merger as a critical step in their growth and expansion plans, and they are committed to seeing it through to completion.
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