Canadian Pacific Railway Limited (CP) and Kansas City Southern (KCS) has announced they have jointly filed a railroad control application with the Surface Transportation Board (STB) regarding the proposed transaction to create Canadian Pacific Kansas City (CPKC), the only single-line railroad linking the United States, Mexico and Canada.

"We are excited to file our joint application for this unique, pro-competitive combination and once-in-a-lifetime partnership," said Keith Creel, CP president and chief executive officer. "CPKC is an extraordinary opportunity to inject new competition and new capacity into the U.S. rail network, further USMCA trade flows, improve safety, grow employment and facilitate new passenger services."

Patrick J. Ottensmeyer, KCS president and chief executive officer cited the many benefits of the proposed single-line rail.

"We are pleased to submit this application together and take another important step toward bringing to fruition this historic opportunity for CP and KCS," Ottensmeyer said.

"In fierce competition with other railroads, trucks and other modes of transportation, CPKC will provide new routes, reach broader markets and create expanded shipping opportunities for customers. This combination will also unlock new infrastructure investment and environmentally-friendly supply chain transportation options that will grow the USMCA economy," he added.

CP said in its statement that the comprehensive control application provides an overview of the proposed operational integration of the CP and KCS rail networks, the impact of that consolidation on the companies' finances and labour needs, and the anticipated competitive and other benefits that will flow from providing shippers with new and better transportation alternatives.

It noted, however, that rail customers will not experience a reduction in independent railroad choices as a result of the CP-KCS combination.

CP has agreed to acquire KCS in a stock and cash transaction representing an enterprise value of approximately US$31 billion, which includes the assumption of US$3.8 billion of outstanding KCS debt. The transaction, which has the unanimous support of both boards of directors, values KCS at US$300 per share, representing a 34% premium, based on the CP closing price on August 9.

CP noted that the transaction is subject to approval by shareholders of each company along with satisfaction of customary closing conditions, including Mexican regulatory approvals. 

Its ultimate acquisition of control of KCS' U.S. railways is also subject to the approval of the STB.

The STB review of CP's proposed control of KCS is expected to be completed in the second half of 2022.