KCS/CP Merger Discussion

https://www.trains.com/trn/news-reviews ... cs-merger/

In the end, it's KCS paying CN $700 million, as well as CP reimbursing KCS for another $700 million. CN gets $1.4 billion for losing.

NHV 669 wrote: ↑Wed Sep 15, 2021 4:35 pm https://www.trains.com/trn/news-reviews ... cs-merger/

In the end, it's KCS paying CN $700 million, as well as CP reimbursing KCS for another $700 million. CN gets $1.4 billion for losing.

They really are only getting $700 million for losing, the other $700 million is a refund of money advanced to KCS, and CP has agreed to return the $700 million it received from KCS since their deal is back on.

JayBee wrote: ↑Wed Sep 15, 2021 6:08 pmThey really are only getting $700 million for losing, the other $700 million is a refund of money advanced to KCS, and CP has agreed to return the $700 million it received from KCS since their deal is back on.

Correct.

CN says: https://www.cn.ca/en/news/2021/09/cn-re ... agreement/
"In connection with KCS’ termination of the CN merger agreement, KCS will pay CN the USD$700 million cash “Company Termination Fee” as well as the USD$700 million cash “CP Termination Fee Refund” provided for in the CN merger agreement. CN is also not obligated to pay any termination fees as a result of the termination of the CN merger agreement."

CN has removed the promotion of their merger offer from their website. KCS has restored promoting "Future for Freight".

https://www.kcsouthern.com/media/news/n ... ic-railway
"Kansas City Southern (NYSE: KSU) (“KCS”) today announced that the Company’s Board of Directors, in consultation with its financial and legal advisors, has unanimously determined that the acquisition proposal KCS received from Canadian Pacific Railway Limited (TSX: CP, NYSE: CP) (“CP”) on September 12, 2021 continues to constitute a “Company Superior Proposal” under KCS’s pending merger agreement with Canadian National Railway Company (TSX: CNR, NYSE: CNI) (“CN”). KCS also announced that it entered into a waiver letter agreement today with CN under which CN agreed to waive the five-business day match period under the CN merger agreement and KCS agreed to terminate the CN merger agreement today."

Yup. I'd think $700M should more than cover the minimal costs CN incurred by throwing their name in the hat....

Sent from my SM-G981U using Tapatalk

CN's offer raised CP's offer. At today's stock price CP's original offer would have been worth $258.24. The increased CP offer is worth $288.45 so by entertaining CN's offer KCS managed to boost their sale price by over 10% (depending on what the stocks do before the closing).

Accepting CP's offer now (pending shareholder vote) with an accepted Voting Trust ready to go means that payday is coming soon. There has already been a partial pay day with KCS stock moving from $224.16 to $281.48 since March. It looks like the board made the right decisions at the right times. Hopefully CP can get a win out of the deal.

Lead story, front page, today in The Journal.

Fair Use:

Canadian Pacific Railway Ltd. clinched a deal to take over Kansas City Southern as a rival dropped its pursuit of the highly coveted railroad after a monthslong battle.

The $27 billion agreement, if completed, would be the first major merger in the industry in the U.S. in about two decades and would create the first freight rail network linking Canada, the U.S. and Mexico.

Canadian Pacific and Kansas City Southern had reached a $25 billion deal in March before the rival, Canadian National Railway Co. , submitted a roughly $30 billion topping bid. That prompted Kansas City Southern to switch partners, before a regulatory panel that must bless railroad mergers denied Canadian National’s plans to use a temporary voting trust, a key element of its proposal.

STB Filing (with the agreement)
"CP and KCS intend to proceed expeditiously to complete and file their Application seeking Board approval for the proposed combination. They anticipate filing the Application on or shortly after October 20, 2021."

https://dcms-external.s3.amazonaws.com/ ... 303003.pdf

Funny, every story I read on this starts out, "if approved". Not a done deal yet.

Biden's DOJ is going after a simpler airline alliance, and some think they are going to sleep walk through this merger in a market where there are no new players?...................................Ok.

https://www.wsj.com/articles/justice-de ... 1632232697

Biden's DOJ probably won't get too far with that airline deal. It is just another distraction from the chaos elsewhere, but it does signal that they might not go easy on CPKC.

Sent from my SM-G981U using Tapatalk

DOJ makes a decent case that AA / Jetblue hook-up deal is anti-competitive. Railroad industry still seems more regulated, SPKC is mostly non-overlapping miles. SPKC seems more "above-board"

John_Perkowski wrote: ↑Tue Sep 21, 2021 12:18 pm
Of note, CPs Royal Hudson will make a grand tour…and Kansas City is the corporate HQ town of KCS.

CP 2816 is not one of the "Royal" Hudsons, still good looking, but without the front end casing.

John Beaulieu

Do you ever wonder how a bad day could get worse? Well, today I came home from a not-so-good day, took a nap, got up, and went on railroad.net to see what everyone is talking about. I check this thread, noticed nobody has commented about Trains Magazine's amazing interview with Keith Creel about CPKC. So I begin reading, begin writing. I write this magnificent thesis intricately dissecting every little detail giving snappy commentary in the process. Then, something happens. My 1000 word masterpiece is deleted. An hour wasted. I am deflated. I walk away to get something to drink then come back to my computer. I decide, no, I need to share my opinion with a very niche group of people on the internet I've never met. So I'm back here, writing this.

I'm going to give you the cliffnotes since I don't want to spend more time writing this. Here we go.

Branding:

"Canadian Pacific Kansas City" is a horrible name that is yet another smash-up of pre-existing names with no real meaning; however, Creel is adamant about it, saying it honors the employees of the two companies. Ok? The bever and shield logo will be kept but modified to include KCS. Good since it is by far the best Class I logo in my opinion. There will be a new paint scheme. Perhaps action red with gray ghost would look good?

Merger Implementation:

CP and KCS only connect in Kansas City and only interchange about four trainloads per day, so I don't expect any major hiccups in the merger implementation. There will be no major day one traffic increases except a new Minneapolis-Dallas intermodal service mentioned by Creel a few months ago. Traffic will begin to grow quickly though.

Upgrades:

Shreveport to Kansas City will go from 40 mph to 60 mph; however, considering how much KCS winds through the Ozarks, I don't know to what extent this will be possible. Kansas City to Chicago will get 60 mph track, extended sidings, and full CTC. I don't see any major problems with this part of the upgrade plan, but perhaps someone who is more knowledgeable about this line (Mr. Norman?) can comment.

Chicago Bypass

The former Gateway Western is a line to nowhere whose only value is a second connection to CSX to KCS. There is no way I could see it becoming a Chicago bypass of any sort. I don't expect CPKC to sell the line as some have predicted since any traffic going to St. Louis is traffic not going to congested-as-hell Chicago.

Houston Bottleneck

Houston is a bottleneck for KCS and will remain so for CPKC. Since CPKC will be competing with UP in far more corridors than CP and KCS currently do, don't expect UP to treat CPKC trains too well. Expect an STB battle between the two railroads to happen a few years after the merger. The only way I could see this being fixed is joint ownership with independent dispatching, like what BNSF has over the former Sunset Route east of Houston.

New Amtrak Services

CPKC will be open to new Amtrak services such as a Shreveport-New Orleans service and a Shreveport-Meridian section of the Crecent. CP is also ranked highest on Amtrak's on-time performance report card. Hopefully this will smooth over the passenger lobby; however, some of those people want to have their cake and eat it too and will find some reason to oppose this.

2816

Great. I no longer have to deal with foamers ranting to me how much they hate EHH, CP, etc everytime I bring up something positive about them all because they retired 2816. This has happened more times than I can count at this point and am glad to see it (hopefully) go away...

Alright, those are my thoughts. Hopefully, I can post this without incident. Good night everybody.
Shortline

Fwiw, the world has lost a few of my posts in just that way; I've found that hitting Preview every paragraph or so seems to forestall the problem.

There is something about HTTPS:// that the stuff you are typing is encrypted, so if it times out & refreshes it is lost vs. the old HTTP:// where it is kept in your browser's memory...or something.