Canadian Pacific & Kansas City Southern Merger
LOCATION: NATIONAL
Issue/Source: On march 21, 2021, canadian pacific railway limited (CP) and kansas city southern (KCS) announced they have entered into a merger agreement, under which CP has agreed to buy KCS for approximately USD$29 billion including outstanding debt.
Date: MARCH 23, 2021
Suggested Responses
- The recent announcement of an agreement to combine Canadian Pacific and Kansas City Southern would create the first and only continuous rail network connecting Canada, the United States (US), and Mexico. The global headquarters of the combined entity would be located in Calgary.
- I understand the proposed transaction is subject to approvals from the U.S. Surface Transportation Board. Transport Canada is also monitoring the proposed merger to better understand any potential implications on Canada’s transportation system.
- An efficient and fluid supply chain network is of the utmost importance to Canada’s economy, and I know that Canadian Pacific plays an important role in ensuring that the network remains strong.
BACKGROUND INFORMATION
- On March 21, 2021, a proposed merger was announced between Canadian Pacific Railway (CP) and Kansas City Southern (KCS). The two railways currently interchange traffic and operate an existing shared facility in Kansas City, Missouri.
- KCS is a Class I railway focused on the north-south freight corridor, connecting the central U.S. with industrial cities in Mexico. KCS’ network has relatively little overlap with CP’s East-West network and it is expected the combined network would offer expanded market reach for their customers, provide new competitive transportation service options, and support North American economic growth.
- The transaction is expected to take 18 months to obtain all the regulatory approvals to close. The main regulatory approvals required are in the United States. The U.S. Surface Transportation Board, an independent tribunal in the U.S. Department of Transportation’s portfolio will look at competition issues, as well as other public interest issues. The Committee on Foreign Investment in the United States will likely need to approve the foreign takeover of a key transportation asset. Some Mexican regulatory approvals will be required as well, as KCS has operation in Mexico.
- While it does not appear the transaction will trigger a review under the “Merger and Acquisitions” provisions of the Canada Transportation Act as the target of the transaction, KCS, does not have assets in Canada, Transport Canada will closely monitor the progress of the proposed transaction before the U.S. Surface Transportation Board, in order to assess any implications for the Canadian context, as well as stakeholder reactions.