‘Ready to roll’: CP Rail preparing for KCS merger, ruling expected within weeks | 24CA News

With the ultimate resolution by a U.S. regulator simply weeks away, Canadian Pacific Railway Ltd.’s CEO says the corporate is “ready to roll” on its proposed merger with U.S. railroad Kansas City Southern.

Keith Creel, head of the Calgary-headquartered railway, made the remark throughout a convention name with analysts earlier this week, by which he confirmed a ruling by the U.S. Surface Transportation Board (STB) is anticipated someday this quarter.

“It’s going to be a very special year for our two storied companies,” Creel stated. “We can’t wait to get to work on combining these two great companies and creating value for our customers, our employees in the North American economy.”

The STB’s resolution is the ultimate hurdle CP should clear in its bid to buy KCS for US$31 billion — a deal which might create the one single-line railroad linking the United States, Mexico and Canada.

If the STB provides the go-ahead, the merged railway can be named Canadian Pacific Kansas City (CPKC). Creel can be CEO, and Calgary will function international headquarters for the brand new entity. Kansas City, Mo., would be the U.S. headquarters, and the Mexican headquarters can be in Mexico City and Monterrey.

While CPKC will stay the smallest of six massive railways working within the U.S. by income, it should function practically 33,000 kilometres of rail — extending from Canada, into the U.S. and all the way in which to Mexico — and make use of practically 20,000 folks.

“I can’t get ahead of the STB. The STB is the authority here and we need their stamp of approval,” Creel stated, including if the choice goes CP’s means, the corporate plans to host an investor day in June to supply extra particulars about the way forward for the merged railroad.

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“I do think that our facts are very strong and it’s a very compelling value creation for all stakeholders and enables growth and all the things that we have said all along … but ultimately, they have to decide.”

It’s been a protracted and bumpy path to get thus far. Both CP and its competitor, Montreal-based Canadian National Railway Co., had been all for buying KCS, and fought a testy battle behind the scenes for months earlier than CP and the U.S. railway introduced a pleasant supply in March of 2021.

KCS then switched alliances a month later by declaring CN’s cash-and-stock bid valued at US$33.6 billion as superior.

However, KCS renewed its assist for CP and its bid afterward after the U.S. transportation regulator denied CN’s use of a voting belief for KCS, saying it might be unhealthy for competitors.

CP, which already had permission to make use of a voting belief below older guidelines, was in a position to shut its proposed deal in December of 2021. Since then, the shares of KCS have been in a voting belief that enables the U.S. railway to function independently whereas the U.S. Surface Transportation Board completes its evaluate.

CP Rail has stated the merger will construct a extra environment friendly and aggressive rail community, and supply clients with a extra dependable and economical transportation choice serving important north-south commerce flows.

However, CN has urged the STB to require the merged firm to divest a few of its KCS rail traces if the deal is permitted to go forward.

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The anti-trust division of the U.S. Department of Justice has additionally expressed considerations over the proposed merger, warning in a latest letter to the STB that the deal poses a menace to competitors and that the regulator should “scrutinize any transaction that could weaken our freight system.”

For its half, CP Rail has stated clients won’t expertise a discount in railroad selection on account of the transaction and has pledged to maintaining all present freight rail gateways open on “commercially reasonable terms.”

CP additionally stated the merger can be good for the setting. It has stated the brand new mixed railway will cut back greenhouse gasoline emissions by serving to freight shippers shift greater than 64,000 vans yearly off of highways.

On Tuesday’s convention name, CP’s chief advertising and marketing officer John Brooks stated the railway and KCS have already been conducting check runs prematurely of the STB’s resolution, operating trains from the U.S. Midwest to Mexico on an inter-line foundation.

“These markets are 100 per cent served by trucks today and present a tremendous conversion opportunity for the combined CPKC,” Brooks stated.

“We’ve done some work with the customers to identify the greenhouse gas emission savings at about 60 per cent to 75 per cent versus their current mode on those specific moves.”

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CP has stated the deal, if it goes forward, can be accretive to its earnings within the first 12 months. In a notice to shoppers this week, RBC Capital Markets analyst Walter Spracklin stated whereas financial uncertainty and the potential of a recession this 12 months pose threats to the rail transport sector, the “structural nature” of development at CP insulates the railroad in opposition to macro elements “like no other railroad, in our view.”

“Moreover, we see integration benefits as real, and likely to be revised upwards,” Spracklin stated.

Raymond James analyst Steve Hansen stated in a notice to shoppers that the STB resolution might come as early as mid-February, with a “pathway to full CP control” of KCS anticipated by mid to late March.

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