Canadian Pacific Railway (CP) today took its latest step toward a planned $31 billion merger with the U.S. freight rail line Kansas City Southern (KCS), following votes by both companies’ stockholders to approve the deal.
The firms say the move would create the first single-line rail network linking the U.S., Mexico, and Canada. It follows a competing bid from rival freight carrier Canadian National that was turned aside in September by federal regulators.
Today’s vote by KCS stockholders showed that 99.6% were cast in favor of the proposed merger agreement. It follows a vote on Wednesday by CP stockholders which produced a similar result, with 99.9% of voters in favor of the deal.
“This week, shareholders of both CP and KCS overwhelmingly supported this transformative proposal to create the first U.S.-Mexico-Canada rail network,” Keith Creel, CP’s president and CEO, said in a release. “With strong shareholder support, we are excited to complete the steps required to close the CP-KCS transaction into the voting trust, a critical milestone in the journey to make Canadian Pacific Kansas City a reality.”
Together, the two votes mean that the transaction is now expected to close on December 14. Immediately following that move, ownership of KCS will be held in a “voting trust” pending the U.S. Surface Transportation Board (STB)’s review and approval of CP’s proposed control of KCS, which is expected to occur in the fourth quarter of 2022, the railroads said. At that point, the combined companies will take on the new name of Canadian Pacific Kansas City Limited.
The voting trust is significant because that was the reason cited by the STB in denying the rival takeover bid, saying that CN’s version of a trust would have been insufficient at ensuring that KCS stayed independently managed pending completion of a full review of the proposed deal.
“The overwhelming support our shareholders have given today to the transaction is critical to making this combination a reality,” Creel said. “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.”