CP and KCS file request for the single-line rail network

Canadian Pacific Railway Ltd (CP) and Kansas City Southern (KCS) announced that they have jointly filed an application for railway control with the Surface Transportation Board (STB) regarding the proposed transaction to create the Canadian Pacific Kansas City (CPKC), the only railway line connecting the United States, Mexico and Canada.

“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. “CPKC is an extraordinary opportunity to inject new competition and new capacity into the US rail network, to foster USMCA trade flows, to improve safety, to develop employment and to facilitate new transportation services. passengers. We stand ready to work with the STB as the Board of Directors conducts a thorough and appropriate review of this transaction, and look forward to the approval so that we can get down to work to deliver these benefits to the northern economy. -american. “

“We are delighted to submit this nomination together and to take another important step towards realizing this historic opportunity for CP and KCS,” said Patrick J. Ottensmeyer, President and CEO of 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. This combination will also unlock new infrastructure investments and environmentally friendly supply chain transportation options that will grow the USMCA economy. “

The comprehensive monitoring application provides an overview of the proposed operational integration of the CP and KCS rail networks, the impact of this consolidation on the finances and workforce needs of companies, and the competitive and other advantages expected. that will result from providing shippers with new and better transportation alternatives. The information in the dossier describes the public and customer benefits that a CP-KCS combination would bring, including more efficient north-south trade routes to support the interconnected supply chains of the United States, Mexico and the United States. Canada.

In addition to the transaction’s central basis for boosting transportation competition and supporting economic growth in North America, the CP-KCS combination will generate many other public benefits, including:

  • The creation of more than 1,000 new direct jobs system-wide, including approximately 760 in the United States, over the next three years, through the expansion of rail operations through the combined network.
  • Capital investments in new infrastructure of more than US $ 275 million over the next three years to improve rail safety and capacity of the CPKC North-South Mainline between Louisiana and the Upper Midwest.
  • Avoidance of over 1.5 million tonnes of greenhouse gas (GHG) emissions in five years by improving the efficiency of CPKC compared to current operations.
  • Divert 64,000 long-haul truck shipments to rail each year with new CPKC intermodal services, eliminating an additional 1.3 million t of GHG emissions over the next two decades, saving US $ 750 million in transportation costs. road maintenance.

Rail customers will not experience a reduction in independent rail choices due to the CP-KCS combination. The request for joint control reiterates the applicants’ commitment to keep all existing freight rail gateways open on commercially reasonable terms, including the Laredo gateway between the United States and Mexico, and shows how customers will not lose competitive routes because no new regulatory bottlenecks are being created. It also describes how the combined company will compete aggressively to attract traffic to its network via new single-line routes between Canada, the Upper Midwest and the Gulf Coast, Texas and Mexico.

Over 960 stakeholders, including over 440 shippers, 186 small railways, dozens of government officials, eight major ports, railway unions representing both CP and KCS employees, and 289 suppliers to the rail industry wrote to STB supporting CP’s proposed merger with KCS. .

CP has agreed to acquire KCS in an equity and cash transaction with an enterprise value of approximately US $ 31 billion, which includes the assumption of US $ 3.8 billion of the outstanding debt of KCS. The transaction, which has unanimous support from both boards of directors, values ​​KCS at $ 300 per share, or a premium of 34%, based on CP’s closing price on August 9, 2021, the date before which CP submitted. a revised offer to acquire KCS, and the unaffected closing price of KCS on March 19, 2021.

The transaction is subject to the approval of the shareholders of each company as well as the satisfaction of customary closing conditions, including Mexican regulatory approvals. Shareholders are expected to vote on the transaction later this year.

CP’s ultimate acquisition of control of US railways from KCS is subject to STB approval. In April 2021, the STB decided that it would review the CP-KCS merger under the merger rules in effect before 2001 and the waiver granted to KCS in 2001 to exempt it from the 2001 merger rules. In August 2021 , the STB reaffirmed that the pre-2001 rules would govern its review of the CP-KCS transaction. On September 30, 2021, the STB confirmed that it had approved the use of a voting trust for the CP-KCS reconciliation.

The STB’s review of CP’s proposed control over KCS is expected to be completed in the second half of 2022. Once control approval is obtained, the two companies will be fully integrated over the next three years, unlocking the benefits reconciliation.

While remaining the smallest of the six U.S. Class 1 railways in terms of revenue, the combined company would have a much larger and more competitive network, operating approximately 20,000 miles of track, employing nearly 20,000 people and generating total revenues of approximately US $ 8.7 billion. based on actual income for 2020.

Read the article online at: https://www.drybulkmagazine.com/rail-barge/01112021/cp-and-kcs-file-application-for-single-line-rail-network/

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