Both Canadian Pacific Railway (CP) and Kansas City Southern (KCS) have entered into a merger agreement valued at approximately US$25-billion. The merger will create the first rail network connecting Canada, the United States, and Mexico.
The merger still has to be formally approved by the Surface Transportation Board (STB), to combine the two railroads but had unanimous approval from both rail company’s Board of Directors.
The two rail networks would join in Kansas City, Missouri. Together the network connects CP’s existing network in Canada and the northeast United States before stretching south to Kansas City to connect to KCS’s network in the midwest and south central United States as well as Mexico, including the southernmost connections in Mexico City and Veracruz.
“This transaction will be transformative for North America, providing significant positive impacts for our respective employees, customers, communities, and shareholders,” said Keith Creel, President and Chief Executive Officer of CP. “This will create the first U.S.-Mexico-Canada railroad, bringing together two railroads that have been keenly focused on providing quality service to their customers to unlock the full potential of their networks. CP and KCS have been the two best performing Class 1 railroads for the past three years on a revenue growth basis.”
Creel said that while they will remain the smallest of six U.S. Class 1 railroad by revenue, the combined company would operate approximately 20,000 miles of rail, employing nearly 20,000 people and generating total revenues of approximately $8.7-billion.
“The new competition we will inject into the North American transportation market cannot happen soon enough, as the new USMCA Trade Agreement among these three countries makes the efficient integration of the continent’s supply chains more important than ever before,” added Creel in the announcement. “Over the coming months, we look forward to speaking with customers of all sizes, and communities across the combined network, to outline the compelling case for this combination and reinforce our steadfast commitment to service and safety as we bring these two iconic companies together.”
“KCS has long prided itself in being the most customer-friendly transportation provider in North America,” said Patrick J. Ottensmeyer, KCS President and Chief Executive Officer. “In combining with CP, customers will have access to new, single-line transportation services that will provide them with the best value for their transportation dollar and a strong competitive alternative to the larger Class 1s. Our companies’ cultures are aligned and rooted in the highest safety, service and performance standards.”
Both Presidents concluded in their joint release that they have been champions for the environment, recognizing the important role rail plays in lowering overall transportation emissions
“This combination advances our shared science-based pledges in-line with the Paris Agreement to improve fuel efficiency and lower emissions in support of a more sustainable North American supply chain.”
The STB is expected to rule on the merger and review the transaction by the middle of 2022.