Share prices of The Canadian Pacific Railway Ltd. and Kansas City Southern were expected to open unchanged on the New York Stock Exchange Monday after news Canadian Pacific had agreed to buy Kansas City Southern for $25 billion.
The deal will form the first ever rail network linking the U.S., Canada and Mexico, reports said Monday.
The consolidated company will operate 20,000 miles of railway, employ around 20,000 workers and generate revenues of almost $9 billion. It is the biggest acquisition deal to date this year.
The merger will be governed by the new U.S.-Mexico-Canada Agreement which went into effect in July - replacing the North American Free Trade Agreement.
The cash-and-shares deal, worth almost $30 billion including debt, values Kansas City Southern at $275 a share and is a 23% premium as of Friday's closing price of $224.16, the two companies said in a statement. Canadian Pacific shares closed Friday at $378.48 each.
Kansas City Southern shareholders, who will own around a quarter of the combined companies, will get almost 0.5 shares of Canadian Pacific and $90 in cash for each share held. The deal is set to close by mid-2022.
Canadian Pacific, which is headquartered in Calgary, said it will issue 45 million new shares and raise around $8.6 billion in debt to pay for the deal. Canadian Pacific is Canada's second biggest railroad operator after Canadian National Railway Co. with a market cap of $50.6 billion.
"The new competition we will inject into the North American transport market can't happen soon enough, as the new trade agreement among these three countries makes the efficient integration of the continent's supply chains more important than ever before," Canadian Pacific president and chief executive Keith Creel said in a statement.
