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Canadian Pacific and Kansas City Southern to merge next month



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

The U.S. rail regulator, the Surface Transportation Board (STB), this week approved the $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 system 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 CEO Keith Creel, who will lead the new entity, said in a statement Friday.

April 14 was the earliest possible date to close the deal, based on the STB’s decision 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.

To “ensure continuity,” KCS President and CEO Pat Ottensmeyer will act as Creel’s adviser until the end of 2023, CP said.

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 up freight transportation time, improve efficiency and enable better competition with the other five major U.S. railroads, he said.

It is also expected that about 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 “commercially reasonable terms.” and justify in writing any rate increase beyond a certain level on interline travel.

“We recognize the rigor and profound insight of the U.S. STB’s final decision, as well as the conditions it enacted to ensure the realization of the public benefits of the transaction and the absence of negative repercussions,” said Mr. Creel on Friday.

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

CP’s main competitor, Montreal-based Canadian National Railway Company (Canadian National), fought a behind-the-scenes battle for months before CP and the American railroad announced a friendly deal in March 2021. A month later, KCS switched alliances, saying CN’s cash and stock offer, valued at US$33.6 billion, was higher — but BTS rejected CN’s offer in March 2021. august. CP was able to complete its proposed deal in December 2021.

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

Its network will extend 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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