Canadian Pacific and Kansas City Southern combination approved by U.S. Surface Transportation Board

Canadian Pacific (“CP”) and Kansas City Southern (“KCS”) said today the U.S. Surface Transportation Board (“STB”) issued a decision approving the CP and KCS joint merger application, subject to certain conditions, thereby authorizing the two railways to combine to form Canadian Pacific Kansas City (“CPKC”), the first single-line railway connecting the U.S., Mexico and Canada.

The decision authorizes CP to exercise control of KCS as early as April 14, 2023, at or after which point CP and KCS would combine to create the new CPKC. CP is reviewing the full 212-page decision in detail and in the coming days will announce its plans with respect to the creation of CPKC.

CP President and Chief Executive Officer Keith Creel extended the company’s sincere gratitude to the STB board and staff for their hard work as part of the comprehensive review of the combination.

CPKC will bring a new standard of safety to the North American rail landscape. CP has been the safest railroad in North America for 17 straight years as measured by the Federal Railroad Administration train accident frequency ratio. In 2022, CP had an all-time best frequency of 0.93, a rate nearly half what the company produced a decade ago and 69 percent lower than the Class 1 average.

CP’s culture of safety, supported by its history of sustained investments in core infrastructure and technology, aligns with KCS’s likeminded culture, allowing the combined system to operate at the apex of rail safety. CPKC will implement the combination with safety at the forefront of everything it does.

Among the core conclusions reached by the STB regarding the public and pro-competitive benefits of the CP-KCS combination, including that the combination “should ultimately enhance safety and benefit the environment”:

The board concluded, “The Transaction will make possible improved single-line service for many shippers and will result in merger synergies that are likely to allow CPKC to be a vigorous competitor to other Class Is by providing improved service at lower cost.”

CP completed its US$31 billion acquisition of KCS on Dec. 14, 2021. Immediately upon the closing of that acquisition, shares of KCS were placed into a voting trust with Dave Starling, former KCS President and CEO, appointed as the trustee. Upon Mr. Starling’s death, Ronald L. Batory was appointed as successor trustee with the STB’s approval. The Voting Trust has ensured that KCS operates independently of CP during the regulatory review process, and until CP exercises control pursuant to the STB decision, CP and KCS will continue to operate independently.

Headquartered in Calgary, Alta., Canada, CPKC would be the first railway connecting North America. While remaining the smallest of six U.S. Class 1 railroads by revenue, the combined company will have a much larger and more competitive network, operating approximately 20,000 miles of rail, employing close to 20,000 people. Once combined, full integration of CP and KCS is expected to happen over the next three years, unlocking the benefits of the combination.

-via Press Release

This article was posted on: March 15, 2023