Votes Are In: CP Shareholders Support CPKC

Written by Marybeth Luczak, Executive Editor

Canadian Pacific (CP) shareholders “overwhelmingly support” the proposed CP-Kansas City Southern (KCS) merger agreement, CP reported on Dec. 8, following a virtual shareholder meeting; the merger would create Canadian Pacific Kansas City (CPKC), the first U.S.-Mexico-Canada rail network.

During the meeting, which was announced last month, CP said shareholders voted on two items:

  1. An ordinary resolution “to approve the issuance of up to 277,960,197 CP common shares as the share consideration under the terms of the merger agreement.” Results: 99.91% of shareholders voted for the resolution; 0.09% voted against it.
  2. A special resolution or name change resolution “to approve an amendment to CP’s articles of incorporation to change its name to Canadian Pacific Kansas City Limited.” This change is contingent upon the Surface Transportation Board’s (STB) approval of the merger. Results: 99.83% of shareholders voted for the resolution; 0.17% voted against it.

“The overwhelming support our shareholders have given today to the transaction is critical to making this combination a reality,” CP President and CEO Keith 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.”

CP and KCS in September agreed to combine in a stock and cash transaction representing an enterprise value of approximately $31 billion, which includes the assumption of $3.8 billion of outstanding KCS debt. The transaction, which has the unanimous support of both Boards of Directors, values KCS at $300 per share, representing a 34% premium, based on the CP closing price on Aug. 9, 2021 and KCS’s unaffected closing price on March 19, 2021, according to CP.

On Sept. 30, STB confirmed that it approved the use of a voting trust for the transaction.

KCS stockholders are expected to vote on the merger agreement during a special KCS stockholder meeting on Dec. 10. “Provided the transaction is approved by KCS stockholders on Friday, the transaction is expected to close into trust two business days later on Dec. 14, 2021,” CP reported. “At the closing into trust, KCS common stockholders will receive 2.884 CP shares and $90 in cash for each KCS common share held. KCS preferred stockholders will receive $37.50 for each KCS preferred share held, and KCS’s voting shares will be placed into trust.”

The STB on Nov. 23 accepted for consideration the CP-KCS merger application, which was submitted on Oct. 29. It reported that the application is “complete as it contains all information required by the Board’s regulations.” STB also adopted a procedural schedule that sets deadlines for comments, responsive applications, final briefs and other filings. The STB review is expected to be completed in fourth-quarter 2022, according to CP.

On Nov. 26, CP and KCS received the required Mexican regulatory pre-transaction control approvals.

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