Canadian National (CN) and Kansas City Southern (KCS) have signed a definitive merger agreement to establish an express route linking the US, Mexico and Canada under a single ownership.
The agreement is valued at almost $33.6bn, with the total transaction value including the assumption of almost $3.8bn of KCS debt.
Though still under evaluation by federal regulators, the railway is expected to create new options for shippers, accelerate innovation, improve competition and reduce traffic congestion in the region.
According to the agreement, KCS shareholders will obtain $325 for each common share on the basis of CN’s offer made on 13 May.
They will obtain $200 in cash and 1.129 shares of CN common stock for each KCS common share.
KCS shareholders are anticipated to own 12.6% of the combined firm.
Following this agreement, KCS terminated the CP merger agreement, which was agreed in March.
CP had agreed to acquire KCS in a cash and stock deal of around $29bn, which also included a $3.8bn assumption of outstanding KCS debt.
Both companies are currently waiting to receive all compulsory regulatory approvals, including from the US Surface Transportation Board (STB) and Mexico’s Federal Economic Competition Commission (COFECE) and Federal Telecommunications Institute (IFT).
After obtaining KCS shareholders’ approval and the fulfilment of customary closing conditions, CN will attain KCS’ shares and place them in a proposed ‘plain vanilla’ voting trust.
Shortly after the closing of CN’s voting trust, expected in the second half of this year, KCS shareholders will obtain the merger consideration.
Following this, the STB and other regulatory authorities will need to sanction CN’s control of KCS.
The entire transaction is expected to be completed in the second half of next year.
CN CEO and president JJ Ruest said: “We are thrilled that KCS has agreed to combine with CN to create the premier railway for the 21st century.
“I would like to thank the numerous stakeholders of both companies who have demonstrated overwhelming support for this compelling combination. We look forward to delivering the many benefits of this pro-competitive transaction to them.”
Last week, STB rejected a plan proposed by CN to establish a voting trust that would buy and own KCS while the deal was being reviewed by the regulator.