Canadian Pacific’s $31B rail deal moves on down the line

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Federal regulators clear the way for Canadian Pacific to consider a $31 billion takeover of Kansas City Southern Railroad

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Kansas City, Mo. Federal regulators on Tuesday cleared a way for Canadian Pacific to consider a $31 billion acquisition of Kansas City Southern Railroad.

The US Surface Transportation Board decided that Canadian Pacific’s merger application was complete, dismissing concerns from other railroads. The board also worked out a program to review the deal, which would last at least next July but could be extended.

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Union Pacific had argued that the merger application did not include sufficient data on how other shipments might be affected by the deal, but regulators said those details were not required at this stage. The board also rejected the procedural arguments of CSX, Canadian National and BNSF Railroads, which held that the application should be delayed.

The $31 billion deal includes the assumption of 2.884 CP shares and $90 in cash and approximately $3.8 billion in debt for each shareholder. Kansas City Southern will be prepared to pay shareholders once investors in both railroads vote on the deal next month and Mexican regulators sign it.

But it will not be clear whether the deal will eventually be sealed until STB completes its review in the second half of next year. Regulators have not approved any major rail mergers since the 1990s.

Canadian Pacific defeated Canadian National’s $33.6 billion bid to acquire Kansas City Southern, even though that railroad offered more funding, as STB agreed with CN’s plan to acquire the Missouri-based railroad. Refused to approve the part.

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