8-KLeadership ChangesMaterial AgreementsRegulation FD+2

CANADIAN PACIFIC KANSAS CITY LTD/CN 8-K Report, Material Agreement (Mar 22, 2021)

Filed March 22, 2021For Securities:CP

Summary

Canadian Pacific Railway Limited (CP) has entered into a definitive Agreement and Plan of Merger with Kansas City Southern (KCS). This strategic transaction will combine the two railway companies, creating a single network spanning Canada, the United States, and Mexico. The proposed merger will be structured as a two-step transaction involving two merger subsidiaries of CP. Upon completion, KCS shareholders will receive a combination of CP common shares and cash. This merger is expected to create a more robust and efficient transportation network, offering significant benefits to customers through expanded reach and improved service. Regulatory approvals from various bodies, including the Surface Transportation Board (STB) and Mexican antitrust authorities, are key conditions for closing the transaction, along with shareholder approvals from both companies.

Key Highlights

  • 1Canadian Pacific Railway Limited (CP) and Kansas City Southern (KCS) have signed a definitive Agreement and Plan of Merger, outlining the terms for their combination.
  • 2The merger will create a single railway network connecting Canada, the U.S., and Mexico, enhancing connectivity and service offerings for customers.
  • 3KCS shareholders will receive a mix of CP common shares and cash consideration upon the successful completion of the transaction.
  • 4The transaction is structured as a two-step merger, with the formation of merger subsidiaries and subsequent integration of KCS into CP's operations.
  • 5Significant regulatory approvals are required, including from the U.S. Surface Transportation Board (STB) and Mexican antitrust authorities, as well as shareholder votes from both CP and KCS.
  • 6Keith Creel, CP's CEO, has entered into an agreement to lead the combined company potentially until early 2026, with a stock option grant valued at $8.4 million.
  • 7The Merger Agreement includes provisions for termination fees for both parties under specific circumstances, with a $700 million fee applicable under several conditions for both KCS and CP.

Frequently Asked Questions

This 8-K filing announces the entry into a Material Definitive Agreement, specifically the Agreement and Plan of Merger between Canadian Pacific Railway Limited (CP) and Kansas City Southern (KCS). It details the terms of the proposed merger and related actions.

Kansas City Southern shareholders will receive a combination of 0.489 shares of CP common stock and $90 in cash for each share of KCS common stock outstanding at the time of the merger, along with specified cash for preferred stock.

Key conditions include the adoption of the merger agreement by KCS stockholders, approval of the share issuance by CP shareholders, effectiveness of CP's registration statement, obtaining necessary regulatory approvals (including from the STB and Mexican authorities), listing approval for CP shares on NYSE and TSX, and accuracy of representations and warranties from both parties.

The Merger Agreement specifies that the mergers are to be completed by December 21, 2021. However, this deadline is subject to extension under certain circumstances, particularly related to regulatory approvals.