By Justin Franz
KANSAS CITY — Canadian Pacific and Kansas City Southern officials gathered in Kansas City this week to begin preparing for what they called a “historic” merger — the first Class I railroad combination in a generation.
The gathering of both railroads’ leadership, including CP President and CEO Keith Creel and KCS President and CEO Pat Ottensmeyer, came a day after Canadian National gave up its effort to merge with KCS. During a call with investors and the media, railroad officials said they expected a streamlined process in part because CP never gave up on its original merger application filed with the U.S. Surface Transportation Board, even after CN briefly lured KCS away this spring. That merger was derailed when the STB rejected a key provision of CN’s plan.
“We have been courting KCS for a while and we’ve had to work hard to get here but we’re excited to be in Kansas City today,” Creel said. “The last five months have been a journey, but it’s been one worth taking.”
CP and KCS are expected to submit their complete merger application next month and have shareholders vote on the proposal in December. Once that happens, KCS will be put into trust during the regulatory review in the United States. Creel said he was optimistic that the STB would be able to complete their review in 10 months and that the merger would be complete during the second half of 2022. Approval in Mexico could come even sooner. The combined railroad will be called Canadian Pacific Kansas City.
The outline of the deal remains nearly unchanged since it was first proposed back in March, except of course for the price, which is now $31 billion, up from $29 billion. Calgary will be the global headquarters of CPKC, and Kansas City will be designated as the U.S. headquarters. The Mexico headquarters will remain in Mexico City and Monterrey. Creel will serve as CEO.
Creel insisted that the benefits of the merger were not going to come through cutting redundancies in the combined system but instead from traffic growth spurred by the combination. He said some customers are already looking at how they ship things and that he believes CPKC can take a significant amount of truck traffic off the nation’s highways, something that is particularly important in an era of climate change, he said. He also said that CPKC did not plan on cutting jobs or closing yards.
“Our objective is to be the best railroad in North America,” Creel said. “The best for our shareholders, the best for our customers, the best for our employees and the best for the communities we serve.”
While federal regulators appeared cool to the idea of a CN-KCS merger, they have appeared to give a high green to a CP-KCS consolidation, something Creel noted multiple times. Creel attributed that to the fact that a CP-KCS deal would be a true “end-to-end” merger since the railroads only connect at a yard in Kansas City whereas there was significant overlap between CN and KCS. However, he said that CPKC would accept any conditions the STB had for the merger.
