Canadian Pacific Railway Limited (CP) and Kansas City Southern (KSU) — two of North America's largest railroad firms — have announced that they have entered into a merger deal creating the first Mexico-US-Canada freight network in history.
In a statement, CP, said it agreed to acquire KCS in "a stock and cash transaction" in a deal approximately worth US$29 billion — less the US$3.8 billion debt that CP will absorb in the transaction.
The merger will combine two of the industry's fastest-growing rail companies at a time when both air and sea capacity have been struggling to cover the demand brought about by a surge in online purchases, among others.
"Following final approval from the Surface Transportation Board, the transaction will combine the two railroads to create the first rail network connecting the US, Mexico, and Canada. Joining seamlessly in Kansas City, Mo., in America’s heartland, CP and KCS together will connect customers via single-network transportation offerings between points on CP’s system throughout Canada, the US Midwest, and the US Northeast and points on KCS’ system throughout Mexico and the South Central US," CP said in its statement.
It added that the deal would also help the firm's become more competitive as the United States-Mexico-Canada Agreement (USMCA)— which replaced the NAFTA agreement between the three countries — takes hold.
"The combined network’s new single-line offerings will deliver dramatically expanded market reach for customers served by CP and KCS, provide new competitive transportation service options, and support North American economic growth," the statement further said.
The combined company — to be called Canadian Pacific Kansas City — would operate 20,000 miles of rail, and employ around 20,000 people with an annual sales target set at US$8.7 billion.
"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 U.S.-Mexico-Canada railroad."
Once approved, the rail companies would join their networks in Kansas City, Missouri, giving customers access to Canada, the US Midwest, the US Northeast, the South Central United States and Mexico — with the interchange point in Kansas City.
"This transaction will alleviate the need for a time consuming and expensive interchange, improving efficiency and reducing transit times and costs. The combination also will allow some traffic between KCS-served points and the Upper Midwest and Western Canada to bypass Chicago via the CP route through Iowa. This will improve service and has the potential to contribute to the reduction of rail traffic, fuel burn, and emissions in Chicago, an important hub city," it added.
The combined rail network would maintain the number six spot among the top-tier railroads in the US by revenue.
