Business & Investment

Canada Pacific and Southern Kansas City agree on $ 31 billion acquisition terms

Canadian Pacific Railway (CP) today after federal regulators withdrew rival bids Agreement on merger plan with US freight railroad Kansas City SouthernThe $ 31 billion transaction will create the first single-track rail network connecting the United States, Mexico and Canada.

The acquisition is currently subject to approval by the US Surface Transportation Board (STB), which approved the early stages of the plan. According to CP, the STB review is expected to be completed in late 2022. Once that approval is obtained, the two companies will be fully integrated over the next three years.

The merged company will operate approximately 20,000 miles of railroads, employ approximately 20,000 people and generate approximately $ 8.7 billion in revenue. Calgary-based CP said.

Despite its vast reach, the company said CP remains the smallest of the six North American Class 1 railroads in terms of revenue. According to CP, the combination of CP and KCS will maintain the six rail structures of North America’s Class 1 rail network. There are two in the west, two in the east, and two in Canada, each with access to the Gulf Coast of the United States.

“Importantly, as a result of this transaction, customers will not have fewer independent rail options,” said CP. “CP-KCS will keep all existing freight railroad gateways open in commercially reasonable terms, while at the same time via the new single-track north-south lane between Canada, the Upper Midwest, the Gulf Coast, Texas and Mexico. Promised to actively compete to attract traffic. “

CP’s message to keep consumer choices in the rail market just two weeks ago The STB has voted to disqualify a $ 33.6 billion bid from rival Canadian National (CN). Purchase KCS and create a similar network. The STB ensures that in its decision, CN’s attempt to use a third-party “voting trust” will continue to be managed independently by KCS until a complete review of the proposed transaction has been completed. Said that it was not enough. As a result, the STB rejected CN’s plans because of “potential public interest harm associated with both competition and sale.”

Despite these concerns, the May STB approved a similar type of voting trust that combines CP and KCS. This indicates that the board is likely to approve the latest bid.

Criticism of that approach came quickly from CN, Said today, that the same logic should be applied to all railroads that are going to trade. CN said it would work “to ensure that all regulatory rules are enforced fairly and that customers are not affected by the anti-competitive effects of the combination of the Pacific Canada and KCS.”

In a statement, CN claimed that it had made many concessions to ensure that potential mergers avoided monopoly disputes. “Through the proposed merger process with KCS, CN will provide all market participants, railroads, and customers with enhanced route selection, pricing transparency, and fair opportunities to compete. To that end, we have made a number of unprecedented competition promotion efforts. In light of STB’s decision on CN-KCS’s joint voting trust application, CN has made KCS without strengthening these public interest and competition efforts. We firmly believe that the Class I merger with and should not be approved, “CN said.

However, CP President and CEO Keith Creel said the proposed transaction would actually improve competition in the freight sector. “The combination maximizes network and employee potential while providing our customers with the best service in the industry. This perfect end-to-end combination dramatically expands to CP and KCS customers. The first US-Mexico-Canada rail network will be created with new single-line products that provide market reach, new competitive transportation options and support for North American economic growth. ” Said.

According to Creel, the combination of CP and KCS will allow railroad companies to better compete with truck fleets for cargo capacity. According to CP, the new single-track route made possible by the merger will shift trucks from crowded US highways, reduce emissions and reduce the need for public investment in road and highway bridge repairs. Is expected. The company’s railroad industry statistics show that railroads are four times more fuel efficient than trucking, can keep more than 300 trucks away from public roads on a single train, and reduce greenhouse gas emissions by 75%. I quoted it.

Canada Pacific and Southern Kansas City agree on $ 31 billion acquisition terms Canada Pacific and Southern Kansas City agree on $ 31 billion acquisition terms

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