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Merger activity remained steady last week with four new deals announced and six deals completed.
Two of the largest deals of this year were announced last week. Headquartered in Calgary, Canada, Shaw Communications (SJR) operates as a connectivity company through wireline and wireless systems. The company entered into an agreement to be acquired by Rogers Communications (RCI). As part of the transaction the combined company plans to invest $2.5 billion in 5G networks over the next five years across Western Canada. The spread on this deal at nearly 20% is high on account of regulatory concerns and an expected closing in the first half of 2022.
On July 31, 2020, we had added Kansas City Southern (KSU) as a potential deal in the works after The Wall Street Journal had announced that, “A group of big buyout investors is considering a takeover bid for railroad operator Kansas City Southern that could be worth more than $21 billion and mark a big bet on U.S.-Mexico trade.” On Sunday, March 21, 2021, KSU entered into an agreement to be acquired by Canadian Pacific Railway Limited (CP) in a cash plus stock transaction. The two step merger process the companies have come up with is interesting and reduces regulatory risks for both shareholders and arbitrageurs. The two step process is described in the press release as follows,
“First, CP will establish a “plain vanilla”, independent voting trust to acquire the shares of KCS. Upon shareholder approval of the transaction, and satisfaction of customary closing conditions, CP will acquire KCS shares and place them into the voting trust. This step is currently expected to be completed in the second half of 2021, at which point KCS shareholders will receive their consideration.
CP’s placement of KCS shares into the voting trust will insulate KCS from control by CP until the STB authorizes control. KCS’ management and Board of Directors will continue to steward the company while it is in trust, pursuing KCS’ independent business plan and growth strategies.