CP Rail’s US$31billion takeover of KCS gains final regulatory approval
MONTREAL –
The U.S. rail regulator is giving a inexperienced gentle to Canadian Pacific Railway Ltd.’s takeover of Kansas City Southern Railway Co.
The Surface Transportation Board’s approval Wednesday clears the ultimate hurdle in CP’s bid to purchase KCS for US$31 billion in a deal that may create the one single-line rail community linking Canada, the U.S. and Mexico.
The merged railway can be named Canadian Pacific Kansas City, with present CP chief govt Keith Creel as CEO and Calgary the worldwide headquarters.
While it’s going to stay the smallest of six massive railways within the U.S. by income, it’s going to function practically 33,000 kilometres of rail and make use of practically 20,000 individuals.
It’s been an extended and bumpy path to get up to now, with CP Rail preventing a protracted battle with competitor Canadian National Railway Co. over the acquisition earlier than CP closed its proposed deal in December 2021.
CP has mentioned the merger will construct a extra environment friendly and aggressive rail community, and supply prospects with a extra dependable and economical transportation choice serving important north-south commerce flows.
However, CN,and the antitrust division of the U.S. Department of Justice have expressed considerations concerning the merger, warning of threats to competitors.
In its choice Wednesday morning, the Surface Transportation Board mentioned the merger is “end to end,” that means there are few overlapping routes. It will pace up freight journey time, improve effectivity and permit for higher competitors with the opposite 5, bigger U.S. railways, it mentioned.
“It is thus not surprising that there is substantial (though not unanimous) shipper support for this transaction — the Board has received more than 450 support letters,” the choice reads.
“Even end-to-end mergers, however, can pose competitive risks, and indeed this decision overturns prior agency precedent that did not sufficiently recognize such concerns.”
The regulator hooked up circumstances to the deal, together with that the newly merged railway hold gateways — connection factors between the CPKC system and different railroads — open on “commercially reasonable terms,” and to justify in writing any price will increase over a sure stage on interline actions.
Martin J. Oberman, chairman of the Surface Transportation Board, is slated to carry a press convention on the choice Wednesday morning.
CP and KCS first introduced a pleasant provide in March of 2021 after a behind-the-scenes duel over the U.S. railway.
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’s affection for CP returned after the U.S. transportation regulator denied CN’s use of a voting belief for KCS, saying it will be unhealthy for competitors.
CP, which already had permission to make use of a voting belief underneath older guidelines, was capable of shut its proposed deal on Dec. 14, 2021. Since then, the shares of KCS have been in a voting belief that permits the U.S. railway to function independently whereas the Surface Transportation Board accomplished its assessment.
This report by The Canadian Press was first printed March 15, 2023.
