The Surface Transportation Board (STB) on Wednesday approved Canadian Pacific Railway’s acquisition of Kansas City Southern Railway, ending a lengthy review process.
The combination of the two railroads, which will be named Canadian Pacific Kansas City (CPKC), creates the first railroad to provide single-line service spanning Canada, the U.S., and Mexico, according to the STB. Once combined, the new company will still be the smallest Class I railroad.
“The transaction will reduce travel time for traffic moving over the single-line service,” the STB said. “it should result in increased incentives for investment; and it will eliminate the need for the two now-separate CP and KCS systems to interchange traffic moving from one system to the other. This will enhance efficiency, which in turn will enable the new CPKC system to better compete for traffic with the other larger Class I carriers. There is substantial (though not unanimous) shipper support for this transaction—the Board has received more than 450 support letters.
“And the other Class I railroads, in opposing the transaction, are simply seeking conditions and other remedies that appear aimed at protecting their own traffic from competition with CPKC and at limiting the ability of the combined CPKC to meet its potential,” the board said. “Consistent with the Board’s policy to protect competition and not competitors, the Board is denying those requests while also ensuring that existing competitive gateway options are preserved.”
The merger approval decision included numerous conditions, including a seven-year oversight period, a ban on terminating reciprocal switching access for shipper facilities, required compliance with a Safety Integration Plan developed in coordination with the Federal Railroad Administration, a requirement that trains in the new company must not block public crossings longer than ten minutes, the establishment of community liaisons in Chicago and Houston to consult with local leaders on noise levels, a requirement to allow Amtrak to add new passenger service over some of its lines, numerous local requirements with municipalities, requirements regarding labor protective agreements, among many others.
With respect to grain specifically, the STB said: “CPKC will be the first railroad with single-line service through Canada, the United States, and Mexico. Shipping of grain, automotive parts and vehicles, and intermodal goods will improve with new single-line options, and shippers will have opportunities to expand their market reach. Imposed conditions will ensure shippers’ options are not reduced. The Board also requires CPKC to adhere to the terms of the CPKC Service Promise to address any post-transaction service disruptions, including developing and reporting customized “Service Action Plans” to address specific issues when certain thresholds are triggered.”
The STB’s announcement can be found here and Canadian Pacific’s announcement can be found here.
