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Canadian Pacific Railway to buy Kansas City Southern for $25B US

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Canadian Pacific Railway Ltd. on Sunday said it has agreed to buy Kansas City Southern for $25 billion US in a cash-and-shares deal to create the first rail network connecting the United States, Mexico and Canada.

Shareholders of Kansas City Southern will receive 0.489 of a Canadian Pacific share and $90 in cash for each KCS common share held, the companies said in a joint statement.

The deal, which has an enterprise value of $29 billion, including debt, values Kansas City Southern at $275 per share, representing a 23 per cent premium to Friday’s closing price of $224.16.

“This transaction will be transformative for North America, providing significant positive impacts for our respective employees, customers, communities and shareholders,” Canadian Pacific chief executive Keith Creel said in the statement.

“This will create the first U.S.-Mexico-Canada railroad.”

Headquarters in Calgary

Creel will continue to serve as CEO of the combined company, which will be headquartered in Calgary, the statement said.

The deal comes amid expectations of a pick-up in U.S.-Mexico trade after Joe Biden replaced Donald Trump as U.S. president.

 

Canadian Pacific Railway president and CEO Keith Creel leaves the stage following his address at the company’s annual meeting in Calgary in 2017. (Jeff McIntosh/The Canadian Press)

 

In a statement posted to Twitter, Alberta Premier Jason Kenney said that if approved, the deal would expand one of the province’s largest employers while increasing shipping access to one of its largest export customers.

 

 

Kansas City Southern’s board has approved the bid, and the two companies have notified the U.S. Surface Transportation Board to seek the agency’s required approval.

Shareholders in Kansas City Southern are expected to own 25 per cent of Canadian Pacific’s outstanding common shares after the deal, the companies said.

Canadian Pacific said it will issue 44.5 million new shares and raise about $8.6 billion in debt to fund the transaction.

The Financial Times first reported on the deal on Sunday.

Previous U.S. deals squashed by regulators

Calgary-based Canadian Pacific is Canada’s No. 2 railroad operator, behind Canadian National Railway Co Ltd., with a market value of $50.6 billion US.

It owns and operates a transcontinental freight railway in Canada and the United States. Grain haulage is the company’s biggest revenue driver, accounting for about 58 per cent of bulk revenue and about 24 per cent of total freight revenue in 2020.

 

Calgary-based Canadian Pacific is Canada’s number two railroad operator. (Canadian Press, Ryan Remiorz)

 

Kansas City Southern has domestic and international rail operations in North America, focused on the north-south freight corridor connecting commercial and industrial markets in the central U.S. with industrial cities in Mexico.

Canadian railroad operators’ attempts to buy U.S. rail companies have met limited success because of anti-trust concerns.

Canadian Pacific’s latest attempt to expand its U.S. business comes after it dropped a hostile $28.4 billion bid for Norfolk Southern Corp. in April 2016. Canadian Pacific’s merger talks with CSX Corp., which owns a large network across the eastern U.S., failed in 2014.

A bid by Canadian National Railway Co., the country’s biggest railway, to buy Warren Buffett-owned Burlington Northern Santa Fe was blocked by U.S. anti-trust authorities in 1999-2000.

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Canada’s manufacturers ask for federal help as Montreal dockworkers stage partial-strike

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MONTREAL (Reuters) – Canada‘s manufacturers on Monday asked the federal government to curb a brewing labor dispute after dockworkers at the country’s second largest port said they will work less this week.

Unionized dockworkers, who are in talks for a new contract since 2018, will hold a partial strike starting Tuesday, by refusing all overtime outside of their normal day shifts, along with weekend work, they said in a statement on Monday.

The Canadian Union of Public Employees (CUPE) Quebec’s 1,125 longshore workers at the Port of Montreal rejected a March offer from the Maritime Employers Association.

The uncertainty caused by the labour dispute has led to an 11% drop in March container volume at the Montreal port on an annual basis, even as other eastern ports in North America made gains, the Maritime Employers Association said.

The move will cause delays in a 24-hour industry, the association said.

“Some manufacturers have had to redirect their containers to the Port of Halifax, incurring millions in additional costs every week,” said Dennis Darby, chief executive of the Canadian Manufacturers and Exporters (CME).

While the government strongly believes a negotiated agreement is the best option for all parties, “we are actively examining all options as the situation evolves,” a spokesman for Federal Labor Minister Filomena Tassi said.

Last summer’s stoppage of work cost wholesalers C$600 million ($478 million) in sales over a two-month period, Statistics Canada estimates.

($1 = 1.2563 Canadian dollars)

 

(Reporting By Allison Lampert in Montreal. Additional reporting by Julie Gordon in Ottawa; Editing by Marguerita Choy)

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Canada scraps export permits for drone technology to Turkey, complains to Ankara

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OTTAWA (Reuters) –Canada on Monday scrapped export permits for drone technology to Turkey after concluding that the equipment had been used by Azeri forces fighting Armenia in the enclave of Nagorno-Karabakh, Foreign Minister Marc Garneau said.

Turkey, which like Canada is a member of NATO, is a key ally of Azerbaijan, whose forces gained territory in the enclave after six weeks of fighting.

“This use was not consistent with Canadian foreign policy, nor end-use assurances given by Turkey,” Garneau said in a statement, adding he had raised his concerns with Turkish Foreign Minister Mevlut Cavusoglu earlier in the day.

Ottawa suspended the permits last October so it could review allegations that Azeri drones used in the conflict had been equipped with imaging and targeting systems made by L3Harris Wescam, the Canada-based unit of L3Harris Technologies Inc.

In a statement, the Turkish Embassy in Ottawa said: “We expect our NATO allies to avoid unconstructive steps that will negatively affect our bilateral relations and undermine alliance solidarity.”

Earlier on Monday, Turkey said Cavusoglu had urged Canada to review the defense industry restrictions.

The parts under embargo include camera systems for Baykar armed drones. Export licenses were suspended in 2019 during Turkish military activities in Syria. Restrictions were then eased, but reimposed during the Nagorno-Karabakh conflict.

Turkey’s military exports to Azerbaijan jumped sixfold last year. Sales of drones and other military equipment rose to $77 million in September alone before fighting broke out in the Nagorno-Karabakh region, data showed.

(Reporting by David Ljunggren in Ottawa and Tuvan Gumrukcu in Ankara; Writing by Daren Butler; Editing by Gareth Jones and Peter Cooney)

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Investigation finds Suncor’s Colorado refinery meets environmental permits

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By Liz Hampton

DENVER (Reuters) – A Colorado refinery owned by Canadian firm Suncor Energy Inc meets required environmental permits and is adequately funded, according to an investigation released on Monday into a series of emissions violations at the facility between 2017 and 2019.

The 98,000 barrel-per-day (bpd) refinery in the Denver suburb of Commerce City, Colorado, reached a $9-million settlement with the Colorado Department of Public Health and Environment (CDPHE) March 2020 to resolve air pollution violations that occurred since 2017. That settlement also addressed an incident in December 2019 that released refinery materials onto a nearby school.

As part of the settlement, Suncor was required to use a third party to conduct an independent investigation into the violations and spend up to $5 million to implement recommendations from the investigation.

Consulting firm Kearney’s investigation found the facility met environmental permit requirements, but also pinpointed areas for improvement, including personnel training and systems upgrades, some of which was already underway.

“We need to improve our performance and improve the trust people have in us,” Donald Austin, vice president of the Commerce City refinery said in an interview, adding that the refinery had already undertaken some of the recommendations from the investigation.

In mid-April, Suncor will begin a turnaround at the facility that includes an upgrade to a gasoline-producing fluid catalytic cracking unit (FCCU) at Plant 1 of the facility. That turnaround is anticipated to be complete in June 2021.

Suncor last year completed a similar upgrade of an automatic shutdown system for the FCCU at the refinery’s Plant 2.

By 2023, the company will also install an additional control unit, upgraded instrumentation, automated shutdown valves and new hydraulic pressure units in Plant 2.

Together, those upgrades will cost approximately $12 million, of which roughly $10 million is dedicated to Plant 2 upgrades, Suncor said on Monday.

 

(Reporting by Liz Hampton; Editing by Marguerita Choy)

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