CP merger creates first Canada-U.S.-Mexico rail network
- March 24, 2021
In the deal, CP will acquire KCS in a stock and cash transaction representing an enterprise value of approximately USD$29 billion, which includes the assumption of $3.8 billion of outstanding KCS debt.
Following final approval from the U.S. Surface Transportation Board, the transaction will combine the two railroads to create the first rail network connecting the U.S., 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 U.S. Midwest, and the U.S. Northeast and points on KCS' system throughout Mexico and the South Central U.S.
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.
While remaining the smallest of six U.S. Class 1 railroads by revenue, the combined company will be a much larger and more competitive network, operating approximately 20,000 miles of rail, employing close to 20,000 people and generating total revenues of approximately $8.7 billion based on 2020 actual revenues.
"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. “Over the coming months, we look forward to speaking with customers of all sizes, and communities across the combined network, to outline the compelling case for this combination and reinforce our steadfast commitment to service and safety as we bring these two iconic companies together."
CP says the combination will provide an enhanced competitive alternative to existing rail service providers and is expected to result in improved service to customers of all sizes. Automotive, auto-parts, energy, intermodal, and other shippers, will benefit from the increased efficiency and simplicity of the combined network, which is expected to spur greater rail-to-rail competition and support customers in growing their rail volumes.
"KCS has long prided itself in being the most customer-friendly transportation provider in North America," said KCS president and CEO Patrick Ottensmeyer. "In combining with CP, customers will have access to new, single-line transportation services that will provide them with the best value for their transportation dollar and a strong competitive alternative to the larger Class 1s. Our companies' cultures are aligned and rooted in the highest safety, service and performance standards."
CP and KCS interchange and operate an existing shared facility in Kansas City, Mo., which is the one point where they connect. This transaction will alleviate the need for a time consuming and expensive interchange, improving efficiency and reducing transit times and costs.
CP's ultimate acquisition of control of KCS' U.S. railways is subject to the approval of the U.S. Surface Transportation Board. The STB review is expected to be completed by the middle of 2022.
Following STB approval, the combined entity will be named Canadian Pacific Kansas City (CPKC) and be headquartered in Calgary with Kansas City, Mo. designated as U.S. headquarters. The Mexico headquarters will remain in Mexico City and Monterrey. CP's current U.S. headquarters in Minneapolis-St. Paul will remain an important base of operations.