Canadian Pacific Railway Limited (TSX:CP) submitted a proposal to acquire Kansas City Southern (NYSE:KSU) (“KCS”) from The Vanguard Group, Inc., MFS Investment Management, Inc., BlackRock, Inc. (NYSE:BLK) and others for $27.4 billion on August 10, 2021. Canadian Pacific Railway Limited (TSX:CP) entered into agreement to acquire Kansas City Southern (NYSE:KSU) from The Vanguard Group, Inc., MFS Investment Management, Inc. and BlackRock, Inc. (NYSE:BLK) and others on September 15, 2021. Under the terms of the transaction, KCS will receive 2.884 Canadian Pacific common shares and $90 in cash for each share of KCS common stock held. Holders of KCS preferred stock will continue to receive $37.50 in cash for each share of KCS preferred stock held. The proposed transaction includes the assumption of $3.8 billion of outstanding KCS debt. Following the closing of the Transaction, KCS stockholders would own approximately 28% of the combined company. The cash portion of the consideration will be funded through a combination of cash-on-hand and approximately $9.5 billion in new debt. To fund the stock consideration of the merger, Canadian Pacific will issue 44.5 million new shares. The cash portion will be funded through a combination of cash-on-hand and raising approximately $8.5 billion in debt, for which financing has been committed. As of September 4, 2021, Kansas City Board of Directors determined that Canadian Pacific Railway's latest offer is 'superior' to its merger agreement with Canadian National Railway Company. Kansas City will pay a fee of $700 million to Canadian Pacific in case Kansas City terminates the agreement, and Canadian Pacific will pay a fee of $700 million to Kansas City in case Canadian Pacific terminates the agreement. The combined entity will be named Canadian Pacific Kansas City and Creel will serve as the Chief Executive Officer of the combined company. Four Kansas City Directors will join CP's expanded Board at the appropriate time. Calgary will be the global headquarters of combined company and Kansas City, Missouri will be the U.S. headquarters. The Mexico headquarters will remain in Mexico City and Monterrey. Canadian Pacific current U.S. headquarters in Minneapolis-St. Paul will remain an important base of operations.

This Offer is subject to the execution of a merger agreement and approval from U.S. Surface Transportation Board. Transaction has been unanimously approved by Board of Directors of both Canadian Pacific and Kansas City Southern. As per Canadian Pacific Railway, if U.S. Surface Transportation Board does not release its decision on the voting trust by August 17, 2021, then it would push the vote scheduled for August 19, 2021 to a later date to give shareholders time to consider the decision. The Surface Transportation Board review of proposed control of KCS is expected to be completed in the second half of 2022. Glass Lewis and Institutional Shareholder Services Inc. have also recommended that shareholders abstain from voting until they know the outcome of trust decision. Transaction is subject to approval of shareholders of both Canadian Pacific and Kansas City Southern, registration statement on Form F-4 having been declared effective by the Securities and Exchange Commission, approval by the Comisión Federal de Competencia Económica (the Mexican Antitrust Commission) and Instituto Federal de Telecomunicaciones (the Mexican Federal Telecommunications Institute) of transactions contemplated by merger agreement, common shares issuable as consideration having been approved for listing on the New York Stock Exchange and Toronto Stock Exchange and other customary closing conditions. The shareholders meeting of Canadian Pacific Railway Limited will be held on December 8, 2021. The shareholders meeting of Kansas City Southern will be held on December 10, 2021. As of September 30, 2021, the Surface Transportation Board confirmed that it has approved the use of a voting trust for the CP-KCS combination. As of November 26, 2021, Mexican Federal Economic Competition Commission and the Mexican Federal Telecommunications Institute approved the transaction. As of October 29, 2021, Canadian Pacific and Kansas City Southern File Merger Application with STB to Create Only Single-Line Rail Network Linking U.S.-Mexico-Canada. As of November 23, 2021, the Surface Transportation Board has accepted for consideration the application filed in connection with the merger. As of December 8, 2021, Canadian Pacific Railway Limited announced that its shareholders voted overwhelmingly in favour of the issuance of CP common shares to Kansas City Southern common stockholders and approved an amendment to CP's articles of incorporation to change its name to Canadian Pacific Kansas City Limited, a change contingent upon the approval by the U.S. Surface Transportation Board of the proposed CP-KCS combination. The Surface Transportation Board review is expected to be completed in fourth quarter of 2022. As on December 10, 2021, KCS stockholders have voted to approve the merger. Transaction is expected to close in H2 2022. As of September 15, 2021, transaction is expected to close in first quarter of 2022. As of October 20, 2021, the transaction is expected to close in the fourth quarter of 2021. As of November 26, 2021, the transaction is expected to close on December 14, 2021. The combination is expected to be accretive to Canadian Pacific adjusted diluted EPS4 in the first full year following Canadian Pacific acquisition of control of Kansas City Southern and is expected to generate double-digit accretion upon the full realization of synergies thereafter. The combined company is expected to create annualized synergies of approximately $1 billion over three years.

Mehdi Ansari, Frank J. Aquila, Ari B. Blaut, Heather L. Coleman, C. Andrew Gerlach, Renata B. Hesse, Christopher L. Mann, Adam S. Paris, Marc Treviño, Davis J. Wang of Sullivan & Cromwell LLP, Jeffrey Kerbel of Bennett Jones LLP and David Meyer of Law Office of David L. Meyer are serving as legal counsel to Canadian Pacific. Creel-García-Cuéllar, Aiza y Enríquez, S.C. is serving as Mexican legal counsel to Canadian Pacific. Stinson LLP is serving as FCC regulatory counsel to Canadian Pacific. Evercore is serving as the Canadian Pacific Board's financial advisors and Blake, Cassels & Graydon LLP is serving as the Board's legal counsel. BofA Securities and Morgan Stanley & Co. LLC are serving as financial advisors and fairness opinion provider to Kansas City Southern. Willkie Farr & Gallagher LLP represented BofA Securities and Morgan Stanley & Co. LLC, the financial advisors to Kansas City Southern. Steven A. Rosenblum and Elina Tetelbaum of Wachtell, Lipton, Rosen & Katz, Baker & Miller PLLC, Davies Ward Phillips & Vineberg LLP, WilmerHale, and White & Case, S.C. are serving as legal counsel to Kansas City Southern. BMO Nesbitt Burns Inc., Evercore Group L.L.C. and Goldman Sachs Canada Inc. acted as financial advisor and provided fairness opinion to Canadian Pacific. Computershare Investor Services acted as transfer agent to Kansas City Southern. MacKenzie Partners, Inc. acted as proxy solicitor to Kansas City Southern and will receive a fee of $0.175 million. Kansas City Southern has agreed to pay a fee of $2.5 million for fairness opinion and $53 million for financial advisory to BofA Securities.

Canadian Pacific Railway Limited (TSX:CP) completed the acquisition of Kansas City Southern (NYSE:KSU) (“KCS”) from The Vanguard Group, Inc., MFS Investment Management, Inc., BlackRock, Inc. (NYSE:BLK) on December 14, 2021. Immediately upon the closing of the acquisition, the shares of KCS were placed into a voting trust with Dave Starling, former KCS President and Chief Executive Officer, appointed as the Voting Trustee. The Voting Trust, which ensures KCS will operate independently of CP. The U.S. Surface Transportation Board STB review of CP's proposed control of KCS is expected to be completed in the fourth quarter of 2022.