Canadian Pacific and Kansas City Southern to merge next month

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Canadian Pacific and Kansas City Southern will merge next month

A Canadian Pacific freight train negotiates the Morant's Curve near Baker Creek, Alberta. (File photo)

Canadian Pacific Railway announced Friday that it will officially merge with the American Kansas City Southern on April 14, adopting a new name at the same time: Canadian Pacific Kansas City (CPKC).

The U.S. rail regulator, the Surface Transportation Board (STB), this week approved the US$31 billion transaction that will see CP acquire KCS and create the only single-line rail network connecting Canada, the United States and Mexico.

Our combined railroads will form an unparalleled single-track network that will connect three countries and instantly increase competition in the North American rail industry at a time when supply chains desperately need it. CP Chief Executive Keith Creel, who will lead the new entity, said in a statement Friday.

April 14 was the earliest possible date to close the deal. ;operation, based on the decision taken by the STB on Wednesday.

CP's Chief Financial Officer, Nadeem Velan, will continue in this role with the combined company, which will be headquartered in Calgary and fully integrated over the next three years. /p>

To ensure continuity, KCS President and CEO Pat Ottensmeyer will act as Mr. Creel's advisor until the end of 2023, said the CP.

STB Chairman Martin Oberman said Wednesday that the regulator had concluded the merger was in the public interest. He pointed out that while rail industry consolidation had been a concern over the past few decades, CP and KCS were actually the two smallest Class 1 railroads in North America, reducing concerns related to a possible lessening of competition.

Few routes will overlap in the merger, Oberman further pointed out. The merger is expected to speed freight time, improve efficiency and allow for better competition with the other five major US railroads, he argued.

A Kansas City Southern train in Tulca, Mexico. (File photo)

It is also expected that approximately 64,000 truckloads per year will migrate from highways to railways, which would help reduce greenhouse gas emissions.

Still, the regulator attached conditions to the deal, including requiring the newly merged railroad to keep gateways — connection points between the CPKC system and other railroads — open on terms. commercially reasonable and justifies in writing any fare increase beyond a certain level on interline travel.

We recognize the rigor and deep insight of the final decision of the STB of the United States, as well as conditions it has decreed to ensure the realization of the benefits of the transaction for the public and the absence of negative repercussions, said Friday Mr. Creel.

“We will proactively and collaboratively participate in the STB's oversight process and abide by the conditions it has imposed. »

— Keith Creel, CP CEO

CN and the US Department of Justice's antitrust division have expressed concerns about the merger, warning of threats to competition. (File Photo)

CP's main competitor, Montreal-based Canadian National Railway Company (Canadian National), fought a behind-the-scenes battle for months before CP and U.S. Railroad announced a friendly deal in March 2021.

A month later, KCS switched alliances, stating that CN's cash and stock offer, valued at US$33.6 billion, was higher – but BTS rejected CN's offer in August. CP was able to conclude its proposed agreement in December 2021.

Although it will remain the smallest of the six major railroads in the United States in of revenue, CPKC will operate nearly 33,000 kilometers of track and employ nearly 20,000 people.

Its network will stretch from Vancouver to Saint John, New Brunswick , to Houston and Mexico City, reaching the Gulf of Mexico and the Pacific Ocean.

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