By Kuldip K. Ambastha
On Sunday, March 21, 2021, Canadian Pacific Railway Limited (CP) announced that it would be buying Kansas City Southern (KSU), for $29 billion ($25 billion in cash and equity, along with $4 billion in outstanding Kansas City Southern debt). The surprise announcement resulted in a +11.1% return for Kansas City Southern plus a -5.8% return for Canadian Pacific, both as seen on the trading day of Monday, March 22, 2021. Subject to regulatory approvals, the merged entity would connect the USA, Canada, and Mexico (the three major countries of North America) through a railroad-based network of about 20,000 miles.
The new entity would be headquartered in Calgary, Alberta, Canada, and led by Keith Creel, the current Chief Executive Officer (CEO) of Canadian Pacific. Post-merger, the company to be called Canadian Pacific Kansas City (CPKC) will have approximately 20,000 employees. No job cuts have been announced. This is the largest-ever merger to be done in the railroad sector.
Politically, the United States-Mexico-Canada Agreement (USMCA) has updated the North American Free Trade Agreement (NAFTA). Canadian Pacific Kansas City (CPKC) will likely benefit from the terms of trade described in the USMCA.
Keywords – Canadian Pacific Railway Limited, Canadian Pacific Railway, Canadian Pacific, CP, Kansas City Southern, KSU, equity, debt, cash, merger, North America, USA, Canada, Mexico, railroad, Calgary, Alberta, Keith Creel, Canadian Pacific Kansas City, CPKC, United States-Mexico-Canada Agreement, USMCA, North American Free Trade Agreement, NAFTA.
Disclosure – The principals and clients of Ambastha Financial LLC have no positions in CP or KSU.
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