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CP-KCS plan to create US-Canada-Mexico railway - if regulators OK deal

THE Canadian Pacific Railway (CP) and Kansas City Southern Railway (KCS) plan to merge through a US$29 billion deal to create the only railroad with a Mexico-United States-Canada network - if regulators allow it, reports IHS Media

23 March 2021 - 19:00
THE Canadian Pacific Railway (CP) and Kansas City Southern Railway (KCS) plan to merge through a US$29 billion deal to create the only railroad with a Mexico-United States-Canada network - if regulators allow it, reports IHS Media.

US political objections stopped the CP-Norfolk Southern Railway (NS) merger five years ago, and this proposal must not threaten to be another step toward mass consolidation of Class I railroads.



CP made bids to merge with CSX Transportation before courting NS. But BNSF Railway and the Union Pacific objected as well as express delivery giants FedEx and UPS, plus a group of politicians. CP said it gave up as it saw 'no clear path to a friendly merger at this time'.



In today's proposal, it is unclear what role Mexican and Canadian regulators will play, given that KCS's network stretches down to the deepsea ports of Lazardo Cardenas and Veracruz, and CP's network connects to ports on both of Canada's coasts, said the report.



A merged railway would run over 20,000 miles and raise revenues of $8.7 billion a year. It would offer cargo owners a single network straddling the largest global trading bloc, providing more competitive service to agriculture, automotive, energy, consumer goods and other types of shippers on a network connecting to eastern and western deepsea Canadian ports.



Said CP president and CEO Keith Creel: 'The new competition we will inject into the North American transportation market cannot happen soon enough, as the new (United States-Mexico-Canada) Trade Agreement among these three countries makes the efficient integration of the continent's supply chains more important than ever before.'The only place the two networks connect is in Kansas City, where they interchange freight and share a storage facility. CP and KCS say a merged company could take pressure off Chicago. where CP's traditional rival, Canadian National plays a leading role.



As the smallest of the seven Class I railroads in the United States and Canada, KCS has long been seen as the likeliest target of a merger, and most recently fended off a takeover. The Wall Street Journal in September reported KCS had turned down a $20 billion offer from Blackstone Group and Global Infrastructure Partners.


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