CP CN

Canadian Pacific Railway Ltd

Industrial/Transportation, Event Driven/Special Sit


Presented:03/28/2016
Price:CA$169.20
Cap:$20.83B
Current Price:CA$112.24
Cap:$83.72B

Presented

Date03/28/2016
PriceCA$169.20
Market Cap$20.83B
Ent Value$28.40B
P/E Ratio20x
Book ValueCA$31.35
Div Yield0.83%
Shares O/S154.00M
Ave Daily Vol492,390
Short IntN/A

Current

PriceCA$112.24
Market Cap$83.72B
Canadian Pacific Railway Ltd. through its subsidiaries operates a transcontinental railway in Canada and the United States and provides logistics and supply chain expertise. It offers rail and intermodal transportation services to business centre of Canada from Montreal, Quebec, to Vancouver, British Columbia, and the U.S. Northeast and Midwest regions. It transports bulk commodities, merchandise freight and intermodal traffic. The company was founded in 1881 and is headquartered in Calgary, Canada.

Publicly traded companies mentioned herein: Canadian National Railway Co (CNR CN / CNI), Canadian Pacific Railway Ltd (CP CN / CP), Norfolk Southern Corp (NSC)

Highlights

With the Canadian Pacific (CP)/ Norfolk Southern (NSC) deal under review, the presenter likes the risk/ reward setup for shares of CP and is long the stock. The 26 billion (CAD; please note, all figures herein are CAD unless otherwise specified) market cap Class 1 rail company has made headlines recently because President and CEO E. Hunter Harrison has been vocal about the deal; however, the structure and complexity of the proposed transaction have led many investors to believe the deal will not end up getting done. The presenter sees the situation as a potential win/ win for bulls, and said the United States Surface Transportation Board (STB) has to provide a ruling on whether or not the voting trust structure is feasible, and investors should expect that decision/ ruling in May, but like the growing majority the presenter does not believe support for the transaction exists. This “key data point” will provide clarity for investors, and if the transaction falls through CP can move forward with an aggressive leveraged buyback program, providing material upside for shareholders. If the deal goes through, the accretion should be substantial.

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Idea Discussion

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