Canadian Pacific Railway Ltd said on Sunday it had agreed to buy Kansas City Southern for $25 billion in a cash-and-stock deal to create the first rail network connecting the United States, Mexico, and Canada.
Shareholders of Kansas City Southern will receive 0.489 of a Canadian Pacific share and $90 in cash for each KCS common share held, the companies said in a joint statement.
The deal comes amid expectations of a pick-up in U.S.-Mexico trade after Joe Biden replaced Donald Trump as U.S. president, the report said.
Kansas City Southern’s board has approved the bid and the two companies have informally informed the U.S. Surface Transportation Board, whose approval will be necessary for the deal.
Calgary-based Canadian Pacific is Canada’s No. 2 railroad operator, behind Canadian National Railway Co Ltd, with a market value of $50.6 billion.
It owns and operates a transcontinental freight railway in Canada and the United States. Grain haulage is the company’s biggest revenue driver, accounting for about 58% of bulk revenues and about 24% of total freight revenues in 2020.
Kansas City Southern has domestic and international rail operations in North America, focused on the north/south freight corridor connecting commercial and industrial markets in the central United States with industrial cities in Mexico.
Canadian railroad operators’ attempts to buy U.S. rail companies have met limited success due to antitrust concerns.
Canadian Pacific’s latest attempt to expand its U.S. business comes after it dropped a hostile $28.4 billion takeover bid for Norfolk Southern Corp in April 2016. Canadian Pacific’s merger talks with CSX Corp, which owns a large network across the eastern United States, failed in 2014.
A bid by Canadian National Railway Co, the country’s biggest railroad, to buy Warren Buffett-owned Burlington Northern Santa Fe was blocked by U.S. antitrust authorities in 1999-2000.