Merger creates first rail network connecting the United States, Mexico and Canada
RIO DE JANEIRO, BRAZIL – Canadian Pacific Railway Limited (CP) and Kansas City Southern (KCS) announced today that they have entered into a merger agreement, in which CP agreed to acquire KCS in a stock and cash transaction representing an enterprise value of approximately US$29 billion and including US$3.8 billion of outstanding KCS debt.
Upon approval by the Surface Transportation Board (STB), the two railroads will create the first rail network connecting the United States, Mexico and Canada.
The union between Kansas City, CP and KCS will connect customers through a single network of transportation options between CP system connection points throughout Canada, the Midwest, Northeast and Northeast United States and KCS connection points throughout Mexico and the South Central U.S.
They also noted that the new single rail network options will provide greatly increased market reach for customers served by CP and KCS, provide new and competitive transportation service options, and foster economic growth in North America.
The transaction is also expected to create jobs. In addition, it will drive efficiency and service improvements to achieve “significant environmental benefits,” the companies said in a joint statement.
“This transaction will transform North America, generating significant positive impacts for our employees, customers, communities and shareholders. “This will create the first U.S.-Mexico-Canada railroad, uniting two railroads that have focused on providing quality service to their customers to unlock the true potential of their networks. CP and KCS have been the top two Class 1 railroads in terms of revenue growth over the past three years,” said Keith Creel, president and CEO of CP.
They also emphasized that this new competition to be developed in the North American market occurred at “the best time”, since the T-MEC (as the USMCA trade agreement is known in Mexico) signed between the three countries gives greater importance to the integration of the continent’s supply chain, and they also highlighted that this project will benefit the environment.
“We have fought for the environment by recognizing the important role that railroads play in the overall reduction of emissions. This combination drives our science-based commitment, consistent with the Paris Agreement, to improve fuel efficiency and reduce emissions for the benefit of a more sustainable North American supply chain,” concluded Creel and Ottensmeyer.
The railroads highlighted that the combination will generate better and more competitive alternatives to existing rail transportation service providers and is expected to result in improved services for customers of all sizes. Grain, automotive, auto parts, energy, intermodal, and other sectors will benefit from the increased efficiency and simplicity of the combined network, which is expected to generate greater competition among railroads and help customers increase their volume transported by rail.
After obtaining the necessary regulatory approvals, a single integrated rail system will connect major ports in the Gulf of Mexico and on the Pacific and Atlantic coasts to key overseas markets. The combination of the CP and KCS networks will offer unprecedented reach through a single rail network covering all of North America.