Canadian Pacific Railway Limited and Kansas City Southern today announced they have entered into a merger agreement, under which CP has agreed to acquire KCS in a stock and cash transaction representing an enterprise value of approximately USD$29 billion1, which includes the assumption of $3.8 billion of outstanding KCS debt. The transaction, which has the unanimous support of both boards of directors, values KCS at $275 per share..
Following the closing into a voting trust, common shareholders of KCS will receive 0.489 of a CP share and $90 in cash for each KCS common share held.
so reports Business Wire.
- Kansas Southern has one of the most compelling color schemes in railroading, a field noted for compelling color schemes.
- Arthur Stilwell founded Kansas Southern.
His writing attracted attention because in them he maintained that he had based many of his life and business decisions on the whispers of what he called fairies or brownies. In his memoirs published in 1927 he reframed this as hunches.
He also founded Port Arthur, Texas.
- CP CEO Keith Creel is a protege of Hunter Harrison, the king of railroad executives. He seems to have a reputation as a very effective railroad runner.
- The map of the combined rail lines is so pleasing. Imagine one unified train line from Vancouver to Mexico City
- The merger has to be approved by the Surface Transportation Board, as well as Mexican regulators. I know very little about the Surface Transportation Board. From FreightWaves:
“The regulatory consideration is an important one because in 2016, during CP’s attempted takeover of Norfolk Southern (NSC), the attempt ended after heightened scrutiny from the Obama administration on antitrust issues,” said Deutsche Bank analyst Amit Mehrotra. “But we note at that time NSC rejected CP’s offer, whereas [this] announcement is a friendly deal, and KSU is only about one-fourth the size of NSC from a revenue standpoint — i.e., pro forma for the deal CPKC will still be the smallest Class I rail.” CPKC stands for the name for the new company.
from High Plains Journal:
Some rail analysts have said STB approval is more likely because in this case, there is no overlap in the route networks that would be merged. “Whenever a merger or acquisition is proposed, red flags are particularly raised among customers when the two companies have a similar geographical footprint. This does not guarantee that significant portions of service will be disbanded or eliminated, but it often portends that,” said Steenhoek.
However, he added, “As one can see from reviewing the current Canadian Pacific and Kansas City Southern network maps, the two railroads currently have very little service overlap. This provides some degree of encouragement among customers–including agricultural shippers—that this particular proposed merger may result in increased service options.”
I see here an estimate of the chance of the deal going through at 67%
- some financial analysis of the deal.
- Today, Tuesday March 30, you can buy a share of KSU for $258.76. If the deal goes through, you will get .489 share of CP plus $90, something like $275. An 8% gain after about a year and a half. That may not be especially attractive, with your money tied up for awhile, most of the investors I can find who analyzed it on Twitter pass. But, the puzzle of calculating and weighing the risk reward there and comparing to other alternatives is kind of interesting. If the deal doesn’t go through, you’d still own part of an obviously valuable railroad network. It’s hard for me to think of a better example of an economic moat than an enormous railroad with no competition. Anyway, I’m not giving financial advice, I just like thinking about this magnificent railroad!
There’s a big stack of books over here I’ve been meaning to write up.
This book is super good. Full of vivid detail.
Drums were banned everywhere in North America except French Louisian by the middle of the eighteenth century, and so were horns, which are made from wood or animal horns and played in hocketing ensembles in the slave coast and Congo-Angola regions.
There are excerpts from a long interview with Jim Dockery, of Dockery Farms. Stories retold and remembered. Sonny Payne tells of the Helena, Arkansas based radio show King Biscuit Time:
These are well-to-do white women listening. I listen, every day when I’m doing the show, for the simple reason that there’s something there. They’re trying to tell you something, and if you think hard enough and listen hard enough, you will understand what it’s all about.
The story this book tells is really about how blues music went from its origin point, where the Southern cross the Dog in the Mississippi Delta, to Chicago and then by record to the UK, where Eric Clapton and Jimmy Page and the Rolling Stones heard it and picked up on it. Along the way there’s so much juicy richness about race and America and music and history and everything. Palmer takes us to a meeting in Chicago where they tried to encourage black migrants to come back to Mississippi.
This book is almost like a response to the fetishizing or the legend-building surrounding the Mississippi Delta and blues music. Says Wald:
If someone had suggested to the major blues stars that they were old-fashioned folk musicians carrying on a culture handed down from slavery times, most would probably have been insulted.
I didn’t know that Mississippi was dry until 1966.
It is startling to thank that all of the evolution from the first Bessie Smith record to the first Rolling Stones record took only forty years. When Skip James and John Hurt appeared at the Newport Folk Festival, they were greeted as emissaries from an ancient, vanished world, but it was only three decades since they had first entered a recording studio – that is, they were about as ancient as disco is to us today.
One point both these books make is that the Mississippi Delta at this time was actually kind of a dynamic region, crisscrossed with railroads, you could quit your job and move and get another one.
Wald tells of an anthropological team from Fisk University and the Library of Congress that visited the Delta in 1941 and 1942. They reported:
There are no memories of slavery in the delta. This section of the delta has little history prior to the revolution of 1861
The research team asked people what their favorite song was. What a question! (My Country Tis of Thee and The Star-Spangled Banner among the answers).
Gotta love a book where this is a footnote.
When I was a kid you couldn’t go to a library book sale or a book store without seeing some paperback Tony Hillerman mysteries, about the Navajo Tribal Police. I never got into books like that, not sure why. But when it comes to New Mexico writers, Tony Hillerman is a name to reckon with. (And there are a lot of New Mexico writers, just see The Spell of New Mexico, edited by Tony Hillerman).
So, as I was gonna be in New Mexico, I got Tony Hillerman’s memoir.
Man. Tony Hillerman was a combat infantryman in World War II. Before he was twenty or so he’d fought his way through the Vosges, killed German boys yards away from him, gone on night raids and been shelled in the dead of winter. Finally he stepped on a landmine, and his war ended in a military hospital. There was a guy in the hospital, a tank gunner, who was called “Jug” because of the way his injuries had mangled his face. Jug considered himself lucky compared to what happened to Colonel Delaney.
All this happened to Tony Hillerman when he was a teenager, before he’d ever really had a girlfriend.
When he got back home, he got a job driving a truck in the New Mexico oil fields. In the Chaco Canyon country, he happened to come across some Navajos on horseback. They were going to an “Enemy Way” ceremony, a ritual for those returned from war.
The healing power and religious idea of this ceremony impressed Tony Hillerman. It was just what he needed. (It sounds like the kind of ceremony Karl Marlantes describes the need for in his book).
Hillerman became a newspaperman in New Mexico, and the rest of the book is mostly funny and interesting stories about that life, and his family, and his decision to attempt some mystery books. On a writing class he taught at UNM:
my premise was that power to persuade lies in the ability to make people see – sometimes literally – the situation as the writer sees it. Instead of telling readers the city should improve its maintenance programs, walk them down the street with you and show them those same details that drew you to that conclusion – the roaches around the drains, the trash collecting on the fences, and so forth. Based on that argument, I’d send them forth.
A good book by a man who seems tough and tender, humble and wise, I read most of it on an overnight train ride.
Speaking of trains, how about Hunter Harrison? A first ballot Hall of Famer for sure if the Hall of Fame is “railroad CEOs.” Hell they’ll probably name the hall after him. Hunter Harrison from the time he was a teenager only ever worked for one kind of company: railroad company.
Harrison’s thing was “Precision Scheduled Railroading,” which apparently revolutionized a kind of sleepy industry.
Harrison created approximately $50 billion in shareholder value in his time as a CEO.
says the book jacket, telling you something about how we’re keeping score. Harrison was an absolute fanatic about railroading. He ran Canadian National, Canadian Pacific, and died on the job running CSX.
I’m not sure if I’ll finish this book, it’s interesting and I’m learning a lot, but I’m just not sure I’m that interested in this guy. So far the part that sticks out in my mind is Harrison’s semi-mentor, Thompson.
Thompson was William F. Thompson – a.k.a. “Pisser Bill”
says the book. I thought the nickname might be kind of a metaphor or something, but no, a few pages later Pisser Bill was at the trainyard and saw something he didn’t like so he pissed all over the place.
This book was worth the price for that alone.