Canadian Pacific Railway Limited (CP) and Kansas City Southern (KCS) have cleared a major hurdle in their proposed merger, with shareholders from both companies delivering resounding approvals for the deal that would create the first rail network connecting Canada, the United States, and Mexico.
Historic Shareholder Support
CP shareholders voted with 99.91% approval to issue CP common shares to KCS shareholders, while KCS investors supported the merger with 99.6% approval. The companies also secured approval to rename the combined entity as Canadian Pacific Kansas City Limited (CPKC), pending final regulatory clearance.
"Today's shareholder approval marks a critical step toward this once-in-a-lifetime partnership," said CP President and CEO Keith Creel. "This is a transformative opportunity for CP, KCS, and the North American economy."
The transaction is expected to close on December 14, with KCS shareholders receiving $90 in cash and 2.884 CP shares for each KCS common share. KCS preferred shareholders will receive $37.50 per share in cash.
Regulatory Pathway
The merger now enters the final regulatory review phase with the U.S. Surface Transportation Board (STB), which accepted the merger application for consideration on November 23. The $31 billion deal, including $3.8 billion of assumed debt, represents the largest rail merger in North America in decades.
STB has established a procedural schedule that could extend through July 2022, with potential public hearings following the submission of final briefs. The companies expect final STB approval in the fourth quarter of 2022.
Strategic Benefits
The proposed combination promises significant operational and economic advantages:
- Creation of a single-line rail network spanning North America
- Enhanced north-south trade corridors supporting USMCA supply chains
- New competitive transportation options for shippers
- Potential reduction of highway congestion through modal shift
- 75% improvement in fuel efficiency compared to truck transport
Creel emphasized the environmental benefits during recent remarks at the RailTrends conference: "This transaction will allow investment in infrastructure and installation of Positive Train Control while reducing truck traffic across borders."
Industry Transformation
The merger represents a strategic response to evolving trade patterns under the USMCA agreement. By connecting Canadian resources, U.S. manufacturing centers, and Mexican ports, CPKC would offer unique single-line service unavailable through other rail combinations.
"This network won't be replicated," Creel noted. "We're positioned to pursue growth opportunities for the next 140 years."
The companies have already received required approvals from Mexican regulators, completing the trinational regulatory process outside the United States.
Future Outlook
Upon final approval, CPKC would immediately place KCS into a voting trust pending STB's control determination. The combined company plans significant infrastructure investments and operational improvements to realize the full potential of the continental network.
Industry analysts suggest the merger could reshape North American freight transportation patterns, particularly for agricultural commodities, automotive shipments, and intermodal traffic moving between the three nations.