Canadian Pacific Railway (NYSE:CP) is buying Kansas City Southern (NYSE:KSU) for $25 billion U.S. in a deal that will link Canada, the U.S. and Mexico.
Kansas City investors will receive 0.489 of a Canadian Pacific share and $90 U.S. in cash for each share they hold, valuing the stock at $275 U.S. apiece – 23% more than Friday’s record close, according to a statement from both companies.
The transaction will create a 20,000-mile rail network and give Canadian Pacific access to Kansas City Southern’s Midwestern rail network that connects farms in Kansas and Missouri to ports along the Gulf of Mexico. It will also give Canadian Pacific reach into Mexico, which made up almost half of Kansas City Southern’s revenue last year, and create the only rail network that cuts through all three North American countries.
Canadian Pacific Railway President and Chief Executive Officer Keith Creel will lead the new company, to be based in Calgary, Alberta and is expected to remain at the helm until 2026. The combined companies will be called “Canadian Pacific Kansas City, or CPKC, and will have revenue of $8.7 billion U.S. and 20,000 employees.
As part of the deal, Canadian Pacific will issue 44.5 million new shares, to be financed with cash-on-hand and about $8.6 billion U.S. in debt.