Calgary Alberta - Canadian Pacific Railway Limited (CP) today announced that its shareholders voted overwhelmingly in favour of the issuance of CP common shares to Kansas City Southern (KCS) common stockholders in connection with the proposed CP/KCS combination.
 
"The shareholder approvals today are a key step on our path to this once-in-a-lifetime partnership to create the first U.S.-Mexico-Canada rail network. This is a transformative opportunity for CP, for KCS, and for the North American economy," said Keith Creel, CP President and Chief Executive Officer.
 
CP shareholders voted on two items of business at Wednesday's special meeting of shareholders.
 
The first was an ordinary resolution (Share Issuance Resolution) to approve the issuance of up to 277,960,197 CP common shares as the share consideration under the terms of the merger agreement.
 
The second was a special resolution (Name Change Resolution) to approve an amendment to CP's articles of incorporation to change its name to Canadian Pacific Kansas City Limited, a change contingent upon the approval by the U.S. Surface Transportation Board (STB) of the proposed CP/KCS combination.
 
The results of the vote are as follows:
 

"The overwhelming support our shareholders have given today to the transaction is critical to making this combination a reality. In the coming days, we will be working to complete the steps required to close into the voting trust, and in the months ahead we look forward to participating in the STB's comprehensive regulatory review. Following receipt of STB approval, and consummation of CP control, Canadian Pacific Kansas City will add new capacity to the U.S. rail network, create new competitive transportation options, support North American economic growth, and deliver other important benefits to customers, employees, and the environment," Creel added.
 
As previously announced on 15 Sep 2021 CP has agreed to acquire KCS in a stock and cash transaction representing an enterprise value of approximately $31 billion [1], which includes the assumption of $3.8 billion of outstanding KCS debt.
 
The transaction, which has the unanimous support of both boards of directors, values KCS at $300 per share, representing a 34 percent premium, based on the CP closing price on 9 Aug 2021, the date prior to which CP submitted a revised offer to acquire KCS, and KCS's unaffected closing price on 19 Mar 2021. [2]
 
On 30 Sep 2021 the STB confirmed that it approved the use of a voting trust for the transaction.
 
The conditions to closing into voting trust include receipt of approval from the shareholders of both companies along with the satisfaction of other customary closing conditions, including receipt of Mexican regulatory approvals.
 
Required Mexican regulatory approvals were received last month, and a special meeting of KCS stockholders to vote on the merger agreement is scheduled for Friday, 10 Dec 2021.
 
Provided the transaction is approved by KCS stockholders on Friday, the transaction is expected to close into trust two business days later on 14 Dec 2021.
 
At the closing into trust, KCS common stockholders will receive 2.884 CP shares and $90 in cash for each KCS common share held.
 
KCS preferred stockholders will receive $37.50 for each KCS preferred share held, and KCS's voting shares will be placed into trust.
 
On 23 Nov 2021 the STB formally accepted the CP/KCS control application and issued a procedural schedule.
 
The STB's review of CP's proposed control of KCS is expected to be completed in the fourth quarter of 2022.
 
Additional information regarding the combination can be found in the management proxy circular dated 1 Nov 2021, which has been filed with both Canadian and U.S. securities regulators, including with the U.S. Securities and Exchange Commission (SEC).
 
For information on the benefits of a CP/KCS combination, visit FutureForFreight.com.
 
[1] Except where noted, all figures are in U.S. dollars.
 
[2] Based on KCS closing share price of $224.16 as of 19 Mar 2021 and CP closing share price of C$91.50 (at 1.2565 FX rate) as of 9 Aug 2021.
 
Author unknown.