Shippers and Short-Line Railroads Express Support for the CP-KCS Combination

More than 250 shippers, railroads, ports, chambers of commerce and other entities have written letters of support for the Canadian Pacific-Kansas City Southern merger to the Surface Transportation Board.

Many of the entities signed a pre-drafted letter that highlights what CP and KCS feel are their strongest cards for persuading the Surface Transportation Board that it should approve the deal: the potential to fuel economic growth and reduce freight congestion and, importantly, to “{strengthen} competition in the freight transport marketplace” – this latter one being a key issue the STB will investigate. The letter also states that it is “important that there be a true USMCA railroad option”.

Canadian Pacific was keen to point out that a number of other railroads expressed their support for the merger, including the largest short-line holding railroad company, Genesee & Wyoming, in the US.

Michael Peters, CCO, Genesee & Wyoming Inc., said in his statement:

“As the operator of short line last mile operations, we know it is vitally important that the long-haul portion of any rail transportation move occur efficiently and effectively for the benefit of our customers.”

 

He went on to say that the merger could improve service and competition by providing an additional competitive route for agricultural products coming out of South Dakota, by creating a more seamless supply chain for finished vehicles and parts moving between the three North American countries, by decreasing transit times and improving railcar use for both shippers and railroads, and by reducing cross-border trucking and improving safety on the existing road infrastructure.

Gerry Gionet, President, GIO Railways, said:

“KCS and CP have had a cooperative relationship in the past, but as separate companies they have not been able to offer our customers the benefits of seamless single-line service. The entirely complementary nature of CP's and KCS' networks will only make CPKC a better alternative. By connecting only at Kansas City, not overlapping anywhere and continuing to interchange with all of their other existing interline partners, the transaction will not have any adverse effects on competition.”

 

Shippers such as Hyundai, Kraft, Nestlé, Hapag-Lloyd etc. also expressed their support though no other Class 1 Railroad has submitted a statement of support to the STB.

Should the merger be approved, Canadian Pacific and Kansas City Southern’s new entity would still remain the smallest of the Class 1 railroads by revenue but with a larger network.

CP is now requesting approval from the STB for the combination of the two companies, which also has to be approved by the CP and KCS shareholders and will also be subject to customary closing conditions. STB will likely finish its review in mid-2022.

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