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CP To Acquire Kansas City Southern In $31 Bln Deal

Canadian Pacific Railway Limited (CP,CP.TO) has agreed to acquire Kansas City Southern (KSU) or "KCS" in a stock and cash transaction representing an enterprise value of about US$31 billion, which includes the assumption of $3.8 billion of outstanding KCS debt, the companies said in a statement.

The transaction values KCS at $300 per share, representing a 34 percent premium, based on the CP closing price on August9, 2021, the date prior to which CP submitted a revised offer to acquire KCS, and KCS' unaffected closing price on March 19, 2021.

CP President and Chief Executive Officer Keith Creel will serve as the Chief Executive Officer of the combined company. The combined entity will be named Canadian Pacific Kansas City or "CPKC".

Calgary will be the global headquarters of CPKC, and Kansas City, Missouri will be the U.S. headquarters. The Mexico headquarters will remain in Mexico City and Monterrey. CP's current U.S. headquarters in Minneapolis-St. Paul will remain an important base of operations.

Following the closing into a voting trust, common shareholders of KCS will receive 2.884 CP shares and $90 in cash for each KCS common share held. Preferred shareholders will receive $37.50 in cash for each KCS preferred share held.

The companies expect the transaction to close and KCS shareholders to receive their consideration in the first-quarter of 2022.

The U.S. Surface Transportation Board or STB review of CP's proposed control of KCS is expected to be completed in the second half of 2022. Upon obtaining control approval, the two companies will be integrated fully over the ensuing three years, unlocking the benefits of the combination.

Earlier today, Kansas City Southern said it has terminated merger agreement with Canadian National Railway Company (CNR.TO, CNI) or CN, and is entering into a merger agreement with CP.

In connection with the termination of the CN merger agreement, KCS will pay CN a breakup fee of $700 million and will also pay CN an additional $700 million in return of the $700 million previously paid by CN to KCS to reimburse the termination fee paid to CP in May.

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