Canadian Pacific Railroad says it has agreed to buy Kansas City Southern Corporation (KCS) for $25 billion in a cash-and-share deal to create the first rail network between the United States, Mexico and Canada.
According to the deal, Kansas City Southern shareholders will receive 0.489 Canadian Pacific shares and $90 per KCS common share, which was valued in the transaction at approximately $275 per share, 23% higher than its closing Friday share price of $224.16, and this deal, which will amount to 29 billion dollars, including debt, is classified as the largest acquisition and merger deal that began in 2021.
Canadian rail operators have tried to buy out American railroad companies several times, with limited success due to monopoly concerns. This deal comes amid expectations that trade between Mexico and the United States will improve after the new US President Joe Biden took over the White House, succeeding former President Donald Trump, during whose reign relations between the two countries soured.
Canadian Pacific is Canada’s second-largest rail operator with a market value of $50.6 billion, after Canadian National Railway, which is the country’s leader. Canadian Pacific said it will issue 44.5 million new shares and raise about $8.6 billion in debt to finance the transaction. Goldman Sachs and BMO Capital Markets will act as financial advisors, while BofA Securities and Morgan Stanley will serve as financial advisors to KCS.