CP and KCS jointly file a merger request with the Surface Transportation Board

Following the conclusion of the agreement reached in mid-September between Class I rail carrier Kansas City Southern (KCS) and the Canadian Pacific Railway Company of Calgary, in which CP will acquire KCS for $ 31 billion. dollars, in a stock and cash transaction that includes the assumption of $ 3.8 billion in outstanding KCS debt, the companies announced late last week that they were now officially ready to take the next step in their relationship.

This next step is their joint filing of an application for control of the railways with the Surface Transportation Board (STB) – an independent economic arbitration and regulation body tasked by Congress with resolving disputes over fares and services. railroads and review proposed rail mergers – regarding the transaction to be established. the new Canadian Pacific Kansas City Company (CPKC), which would become the only single line railway connecting the United States, Mexico and Canada.

CP and KCS have stated that the monitoring application provides:

  • an overview of the operational integration project of the CP and KCS rail networks, -the impact of this consolidation on the finances and labor needs of companies; and
  • the competitive and other advantages expected from providing shippers with new and better transportation solutions

They also added that the information in the dossier describes the benefits to the public and customers that a CP-KCS combination would bring, including more efficient north-south trade routes to support interconnected US supply chains. , Mexico and Canada.

CP and KCS have stated that this transaction is subject to the approval of the shareholders of CP and KCS as well as the satisfaction of customary closing conditions, which include Mexican regulatory approvals. Shareholders are expected to vote on this transaction later in 2021.

KCS and CP said the deal is subject to approval by the Surface Transportation Board (STB), which reaffirmed last April that it would review the CP-KCS deal under the pre-2001 merger rules as well as the waiver granted to KCS in 2001 to exempt from these rules. And they added that STB’s review of the deal is expected to be completed in the second half of 2022.

Both CP and KCS leaders have indicated that they welcome the joint filing of this request.

“We are delighted to file our joint application for this unique, pro-competitive combination and once-in-a-lifetime partnership,” said Keith Creel, President and CEO of CP, in a statement. “CPKC is an extraordinary opportunity to inject new competition and new capacity into the US rail network, to increase USMCA trade flows, to improve safety, to develop employment and to facilitate new services.” to passengers. We are ready to work with the STB as the board of directors gives this transaction a thorough and appropriate review, and we look forward to the approval so that we can get down to work to deliver these benefits to the Northeast economy. American. “

Pat Ottensmeyer, President and CEO of KCS, said in the same release that the companies are happy to submit this nomination together and take another important step towards realizing this historic opportunity for CP and KCS.

“In fierce competition with other railways, trucks and other modes of transportation, CPKC will provide new routes, reach larger markets and create expanded shipping opportunities for customers,” he said. . “This combination will also unlock new investments in environmentally friendly infrastructure and supply chain transportation options that will grow the USMCA economy.”

During a conference call in mid-September, the two leaders touted the benefits of the deal.

Creel explained that this was an opportunity to bring together two iconic companies, both of which have unprecedented backgrounds in service, safety and efficiency.

“It will remain the smallest of the Class I railroad while injecting competition into the North American transportation landscape,” he said. “We continue to see challenges, and it is undeniable that the pandemic has exerted on our supply chain, and this combination creates stability and opportunity for our customers in the North American transportation system. ”

Ottensmeyer said KCS and CP have been the two fastest growing railroads in the industry in the recent past, adding that this combination is driven by the growth and opportunity that a North American rail franchise one of a kind will create.

“Not only will we participate in the growth that the USMCA (United States-Mexico-Canada Agreement) and other factors create for a resurgence of manufacturing in North America, we believe this combination – and the creation of that network – help drive that growth and attract manufacturing and investment to the three countries of North America, ”he said. “This creates competitive truck options and single-line service options to take advantage of this network and deliver significant environmental benefits and reduced carbon emissions by converting traffic from trucks to rail. We will both succeed in diversifying our service offerings for both companies from what we have today and access new markets and new growth opportunities in the future. “

Ottensmeyer added that CPKC offers a formidable footprint, as well as port access and access to most of the major growing industrial markets in North America, and reiterated that this transaction is built on growth and the creation of new market opportunities. for customers, extending the environmental benefits of rail and creating new competitive options for single-line rail service that do not exist today.

About the Author

Jeff Berman, Group News Editor Jeff Berman is Group News Editor for Logistics management, Modern material handling, and Supply chain management review. Jeff works and lives in Cape Elizabeth, Maine where he covers all aspects of the supply chain, logistics, freight transportation and material handling industries on a daily basis. Contact Jeff Berman

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