CP Rail Agrees to Buy Kansas City Southern for $25 Billion

(Bloomberg) —Canadian Pacific Railway Ltd. agreed to buy Kansas City Southern for $25 billion, seeking to create a 20,000-mile rail network linking the U.S., Mexico and Canada in the first year of those nations’ new trade alliance.

The transaction creates the only network that cuts through all three North American countries, giving CP access to the Kansas City, Missouri-based company’s sprawling Midwestern rail network that connects farms in Kansas and Missouri to ports along the Gulf of Mexico. The network would also let CP reach deep into Mexico, which made up almost half of Kansas City Southern’s revenue last year.

“I’ve had my eye on the KCS for quite some time,” CP Chief Executive Officer Keith Creel said in a telephone interview. “We extend our reach for our customers through the U.S. and into Mexico, and at the same time KCS can do the same coming from Mexico up to U.S. destinations and Canada.”

The combination — the biggest purchase of a U.S. asset by a Canadian company since 2016 — would provide a transportation solution for manufacturers seeking to bring factories back to North America after the pandemic exposed risks of relying on overseas supply chains, Creel said. The merger has a “compelling and powerful environmental impact” by enticing more truck cargo to rail, which is about four times more fuel efficient, he said.

Kansas City investors will receive 0.489 of a CP share and $90 in cash for each share they hold, valuing the stock at $275 apiece — 23% more than Friday’s record close, according to a statement from both companies on Sunday.

Creel will be CEO of the new company, to be based in Calgary, and is expected to remain at the helm until at least early 2026, according to a separate statement. The new entity, to be called Canadian Pacific Kansas City, or CPKC, will have revenue of about $8.7 billion and almost 20,000 employees.

Trade Play

The transaction would be the biggest 

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