(February 13 – 11:20 ET) – One of Canada’s last remaining, and most venerable conglomerates, Canadian Pacific Ltd., today announced its intention to divide the company into five separate companies, all of which will be publicly traded.

Under the proposed reorganization, CP intends to distribute its 86% investment in PanCanadian Petroleum, and its 100% interest in each of CP Railway, CP Ships, and Fording to holders of Canadian Pacific’s common shares. It is currently envisioned that CP Hotels will be the only significant business of Canadian Pacific.

Post-distribution, shareholders will have shares in five separate public companies. While this plan represents Canadian Pacific’s current intention, it could be modified in response to market conditions as the process unfolds. CP said the reorganization is designed to maximize value for CP shareholders by unlocking the current value of CP’s businesses and by strengthening their ability to pursue even greater success as independent public companies.

David O’Brien, chairman, president and CEO of CP, said, “We expect this distribution will not only unlock significant value now but also will provide sustainable value for Canadian Pacific’s shareholders over the long term.”

“As independent companies, each will be able to react decisively to the competitive forces in its own market, and pursue short and long-term strategies that are appropriate to its industry, ” O’Brien added.

In a joint statement, the CEOs of CP’s operating subsidiaries said, “We welcome today’s announcement and face the future with confidence. We want to assure our employees, customers, suppliers and other business partners that it will be very much business as usual during this process.”

The proposed distribution will be effected by way of a Plan of Arrangement that will be subject to shareholder and court approvals, other requisite consents and a favourable Canadian advance tax ruling. If the requested Canadian tax approvals are obtained, the reorganization should not result in any adverse tax consequences for Canadian shareholders. A U.S. tax ruling is also being sought to provide similar assurance to U.S. shareholders although obtaining a favourable U.S. tax ruling is not a necessary condition for the reorganization to proceed.

Committed bank credit facilities totalling $3 billion for CP and its subsidiaries have been arranged to ensure liquidity and the companies’ ability to continue to meet their capital commitments through this process. Provided that the transaction proceeds as planned, CP currently anticipates: providing the holders of its preferred shares with dividend and capital support, or an opportunity to redeem their shares, on a voluntary basis; and redeeming its medium term notes in accordance with their terms.

RBC Dominion Securities, Inc. is acting as financial advisor to CP on the proposed transaction.
-IE Staff