Press Release: Canadian Pacific Limited
February 15, 2001
CALGARY, AB -- Canadian Pacific Limited Feb. 13 announced its intention to divide the company into five separate
companies, all of which will be publicly traded. This reorganization is designed to maximize value for Canadian
Pacific shareholders by unlocking the current value of Canadian Pacific's businesses and by strengthening their
ability to pursue even greater success as independent public companies.
Under the proposed reorganization, to be implemented through a Plan of Arrangement, Canadian Pacific intends to
distribute its approximately 86% investment in PanCanadian Petroleum and its 100% interest in each of Canadian
Pacific Railway, CP Ships, and Fording to holders of Canadian Pacific's common shares. It is currently envisioned
that, after the distribution, Canadian Pacific 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.
David P. O'Brien, Chairman, President and Chief Executive Officer of Canadian Pacific, said, "This reorganization
is the right step to take for our shareholders, for these five exceptional companies, and for the wider investment
community. It will reward our shareholders now, by unlocking the full value of each business, and in the future,
by providing them an excellent opportunity to participate in further growth and development of the businesses and
their industries. It will better equip each business to pursue even greater success by providing them with direct
access to public equity markets and shares that can be used as acquisition currency and incentive compensation.
It will also allow the management of each company to evaluate its growth opportunities and organize its capital
structure according to its own industry. As well, the investment community will be able to more easily follow and
accurately value these industry leaders on a stand-alone basis against competitors, benchmarks and performance
criteria specific to each business sector."
"We are initiating this process from a position of unprecedented strength and following a thorough review
of alternatives aimed at maximizing value for everyone concerned. Our Board of Directors unanimously concluded
that the time is right and the highest value could be achieved by enabling our diverse businesses to stand as independent
public companies. As the 2000 results showed, these companies are performing well and are now positioned to further
grow and prosper in the coming years. 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. "
Mr. O'Brien added, "All of these businesses are in excellent positions to address this next stage in their
evolution. In recent years we have helped them achieve the size, scope, financial strength and profitability required
to succeed in a fast changing and increasingly competitive environment. Each of the companies is now a strong player
in its field. We are confident that they are ready to grow and succeed as fully independent public companies in
their own right and to create further value for shareholders in the future."
In a joint statement, the Chief Executive Officers of Canadian Pacific's operating subsidiaries said, "We
welcome today's announcement and face the future with confidence. As members of the Canadian Pacific group of companies
we have received invaluable assistance in building our companies to the point where we can approach the future
from a position of strength. Our companies are proven performers, generators of value and leaders in their respective
industries. We look forward to the challenges and opportunities of independence. 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 or opinion, as may be
required. 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 $3.0 billion for Canadian Pacific and certain of its subsidiaries have
been arranged as part of ensuring liquidity and the companies' ability to continue to meet their capital commitments
through this process. Provided that the transaction proceeds as planned, Canadian Pacific currently anticipates
a) providing the holders of its preferred shares with dividend and capital support, or an opportunity to redeem
their shares, on a voluntary basis, and b) redeeming its medium term notes in accordance with their terms.
Canadian Pacific intends to capitalize each company with amounts of debt and equity that are appropriate for its
growth prospects and the industry in which it operates. In particular, PanCanadian's capital structure is underlevered
compared to its industry peers. Canadian Pacific intends to recommend to the Board of Directors of PanCanadian
that the company pay a special dividend to its shareholders of approximately $1.15 billion, just prior to the reorganization.
It is expected that an information circular outlining details of the proposed transaction will be mailed to Canadian
Pacific shareholders around the middle of 2001, with a meeting of shareholders to be held in the early fall. Canadian
Pacific expects to complete the transaction later in the fall of 2001.
Mr. O'Brien stated that, "Canadian Pacific and all of its companies will continue to conduct business in the
normal manner during this period, honouring all existing business relationships, commitments and obligations. We
will ensure that the reorganization is handled in a manner that is fair and responsible to all our stakeholders,
and we will keep them informed of developments as they arise. Additional details on the reorganization process
will be released, as they become available."
RBC Dominion Securities, Inc. is acting as financial advisor to Canadian Pacific on the proposed transaction.
Conference Call for the Investment Community: Canadian Pacific will host a conference call for financial analysts
and investors at 9:30 a.m. Eastern Time / 7:30 Mountain Time today. Media may participate in "listen only"
mode. Dial in numbers are as follows: from North America, 1-888-793-1722; from overseas, 416-641-6677. Help lines
for those requiring assistance are: from North America 1-800-473-0602 and from overseas 905-502-3700. Please dial
in at least 15 minutes before the call is scheduled to begin.
The call will be available on post-view until the end of Friday, February 16, 2001. Dial in numbers and pass codes
are as follows: from North America 1-800-558-5253 (17926439); from overseas 416-626-4100 (17962876).
A live audio webcast of the investor conference call will also be available via our corporate website (www.cp.ca).
Mr. O'Brien's prepared remarks as well as an archived version of the webcast will be posted to the corporate website
following the conference call.
Media Briefing: Canadian Pacific will host a media information session at 11:00 a.m. Eastern Time / 9:00 a.m. Mountain
Time today in Salon B, Convention Floor, the Fairmont Royal York Hotel, Toronto, Ontario. Media who cannot attend
in person may call into the event as follows: from North America, 1-888- 617-9296; from overseas, 416-641-6690.
Additional information for debt holders will be available on the corporate website (www.cp.ca).
Note: This news release contains forward-looking information. Actual results may differ materially. The risks,
uncertainties and other factors that could influence actual results are described in the Corporation's annual report
to shareholders and annual information form.
Calgary-based, Canadian Pacific is a diversified operating company active in transportation, energy and hotels.
In 2000 Canadian Pacific produced cash flow of $3.92 billion and net income of $1.76 billion. The common shares
of Canadian Pacific are listed on the Toronto and New York stock exchanges. The Corporation's preferred shares
are listed on the Toronto Stock Exchange.
Canadian Pacific Railway is one of the most efficient railway companies in North America with one of the best operating
ratios among major railroads on the continent. An extensive $3.3 billion revitalization plan has begun to pay off
through increased efficiencies, improved customer service and higher volumes. It reported year 2000 operating income
of $845 million, a 130% increase since 1994.
CP Ships is the seventh largest container shipping company in the world and the largest carrier of containers on
the North Atlantic. The company is a market leader in most of its trade lanes, serving 50 countries with its fleet
of 80 vessels. Between 1994 and 2000 the company's container carryings increased seven-fold to 1,800,000 twenty-foot
equivalent units (teus). It reported record operating income of $252 million in 2000.
PanCanadian Petroleum is one of Canada's largest producers and marketers of crude oil, natural gas and natural
gas liquids. It has the largest equity market capitalization of any Canadian-controlled energy company. The company's
strategic refocusing has seen its natural gas production increase by 57% since 1994 and natural gas now represents
60% of the company's total production. In 2000, it reported record operating income of $1.778 billion.
Fording is Canada's lowest cost producer of metallurgical coal, with 2001 production expected to represent some
60% of the country's output in this category. It is also Canada's largest producer of coal for export and the world's
largest producer of the industrial mineral wollastonite. The company has generated the highest return on capital
of any major Canadian mining company over the last five years. It reported operating income of $83 million in 2000.
Canadian Pacific Hotels is the largest luxury hotel operator in North America and the largest first class hotel
management company in Canada. Since 1994 the company's number of rooms under management has tripled to 30,000.
It reported year 2000 operating income of $255 million, the seventh consecutive year of record performance.
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For further information
Media: Dawn Mitchell, (403) 218-8066 dmitchell@cp.ca Investors: Sheila McIntosh, (403) 218-8060 smcintosh@cp.ca