Canadian Pacific RR Wins Battle for Kansas City Southern RR

With their victory over rival Canadian National in hand, executives from Canadian Pacific (CP) recently said the railroad's merger with Kansas City Southern (KCS) railroad will be "a real game changer" in the flow of agricultural commodities, especially for Canada and upper Midwest states.

Speaking to analysts, Canadian Pacific executives again laid out some of the opportunities they first championed in mid-March when CP first appeared to strike a deal to buy KCS before a six-month regulatory battle after CP's initial bid appeared to be usurped by Canadian National.

KCS’s board of directors, who unanimously approved CP’s purchase proposal, retracted its agreement with Canadian National. For its part, Canadian National agreed to waive a five-day match period, allowing its proposal to terminate.

The merged rail line will be called Canadian Pacific Kansas City (CPKC). It will remain the smallest Class I railroad in the U.S., with about 20,000 miles in rail line. But, as executives stressed, it creates one aspect the other five Class I rail lines do not have, which is a single line going from throughout Canada, down the central U.S., and deep to central Mexico, connecting with shipping ports in all three countries along the way. The deal was sparked partially by the U.S.-Mexico-Canada Agreement (USMCA) trade deal that went into effect in 2020.

EDITOR’S TAKE:

Finally! We first reported on the possibility of a merger several months ago and now it has come to fruition. The advantage of connecting the three nations (U.S./Canada/Mexico) via rail makes sense. It should create a more responsive market for products shipped via this route and open more cross-border shipments. The hypothesis is that this will be good for farmers and processors. Overall, it does appear to be a good deal.