Business combination (Notes)

12 Months Ended

Dec. 31, 2019

On December 30, 2019, CP acquired 100% of Central Maine & Québec Railway Canada Inc. (“CMQ Canada”) and Central Maine & Québec Railway U.S. Inc. (“CMQ U.S.”) (together “CMQ”) for cash consideration of $174 million. CMQ owns 237 miles of rail lines in Québec and 244 miles of rail lines in Maine and Vermont.

CMQ Canada

The acquisition of CMQ Canada has been accounted for as a business combination under the acquisition method of accounting. The acquired tangible and intangible assets and assumed liabilities are recorded at their estimated fair values at the date of acquisition.

The purchase price allocation was prepared on a preliminary basis and is subject to change as additional information becomes available concerning the fair value and tax bases of the net assets acquired. Any adjustments to the purchase price allocation will be made as soon as practicable but no later than one year from the date of acquisition.

The following summarizes the estimated fair values of the acquired assets and liabilities of CMQ Canada:



(in millions of Canadian dollars)	2019
Fair value of net assets acquired:
Accounts receivable, net	$	7
Properties	42
Intangible assets (Note 15)	5
Accounts payable and accrued liabilities	(2		)
Long-term debt maturing within one year (Note 18)	(11		)
Other long-term liabilities	(4		)
Total identifiable assets and liabilities	$	37
Goodwill (Note 15)	10
	$	47
Consideration:
Cash, net of cash acquired	$	47

The goodwill of $10 million relates primarily to expected operating business synergies. The factors that contribute to the goodwill are revenue growth from customers which are currently not served by CP, access to new routes and an assembled workforce. The goodwill recognized is not deductible for tax purposes.

CP has not provided pro forma information relating to the pre-acquisition period as it is not material.

CMQ U.S.

CP currently accounts for its $127 million cost of acquisition of CMQ U.S. using the equity method of accounting as the shares of CMQ U.S. are held in an independent voting trust while the United States Surface Transportation Board (“STB”) considers the Company's control application (see Note 13). Subject to final approval of the transaction by the STB, the acquisition of CMQ U.S. will be accounted for as a business combination using the acquisition method of accounting.