Railroad merger to link Canada, US and Mexico

Canadian Pacific Railway (CP) and Kansas City Southern (KCS) have entered into a merger agreement that is expected to deliver a dramatically expanded market and support economic growth in North America.

The CP Railway agreed to acquire KCS in a $29 billion deal Sunday that would create the first railroad network connecting Canada, the United States and Mexico on Sunday , a "compelling" move after the United States-Mexico-Canada Agreement (USMCA) became law last year and a "bet" on the economic recovery from the pandemic for the three nations.

The combined company, Canadian Pacific Kansas City, will have its global headquarters in Calgary, Alberta, while Kansas City, Missouri, will serve as its US headquarters.

The 20,000-mile network stretching across the continent will connect customers via a single network between points on CP's system throughout Canada, the US Midwest and US Northeast and points on KCS' system throughout Mexico and the South Central US.

By providing new competitive transportation service options, the merger is also expected to create jobs across the combined network. Additionally, efficiency and service improvements are expected to achieve environmental benefits.

"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," said CP President and CEO Keith Creel. "This will create the first US-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."

Creel said the combined company would be able to increase annual revenue by $800 million, about 9 percent more than the companies' combined revenues in 2020.

"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," said KCS president and CEO Patrick J. Ottensmeyer. "In addition, labor partners and shareholders will all benefit from the inherent strengths of this combination, including attractive synergies and complementary routes."

The two partners said the proposed combination wouldn't reduce choices for customers because there is no overlap between their systems, and the single-line routes would shift trucks off US highways, reducing congestion and lower overall transportation emissions.

CP's ultimate acquisition of KCS' railways is subject to the approval of the US Surface Transportation Board and other regulatory authorities. The STB review is expected to be completed by mid-2022.