• ITVI.USA
    15,615.260
    270.480
    1.8%
  • OTLT.USA
    2.852
    -0.002
    -0.1%
  • OTRI.USA
    19.840
    0.040
    0.2%
  • OTVI.USA
    15,608.360
    280.700
    1.8%
  • TSTOPVRPM.ATLPHL
    2.890
    0.070
    2.5%
  • TSTOPVRPM.CHIATL
    3.540
    -0.040
    -1.1%
  • TSTOPVRPM.DALLAX
    1.290
    0.030
    2.4%
  • TSTOPVRPM.LAXDAL
    3.660
    0.010
    0.3%
  • TSTOPVRPM.PHLCHI
    2.360
    0.030
    1.3%
  • TSTOPVRPM.LAXSEA
    4.100
    0.080
    2%
  • WAIT.USA
    129.000
    2.000
    1.6%
  • ITVI.USA
    15,615.260
    270.480
    1.8%
  • OTLT.USA
    2.852
    -0.002
    -0.1%
  • OTRI.USA
    19.840
    0.040
    0.2%
  • OTVI.USA
    15,608.360
    280.700
    1.8%
  • TSTOPVRPM.ATLPHL
    2.890
    0.070
    2.5%
  • TSTOPVRPM.CHIATL
    3.540
    -0.040
    -1.1%
  • TSTOPVRPM.DALLAX
    1.290
    0.030
    2.4%
  • TSTOPVRPM.LAXDAL
    3.660
    0.010
    0.3%
  • TSTOPVRPM.PHLCHI
    2.360
    0.030
    1.3%
  • TSTOPVRPM.LAXSEA
    4.100
    0.080
    2%
  • WAIT.USA
    129.000
    2.000
    1.6%
NewsRail

CP, KCS send regulators scores of additional letters backing rail merger

Merger would enable more north-south trade flow in addition to existing east-west flows, proponents suggest

Canadian Pacific (NYSE: CP) and Kansas City Southern (NYSE: KSU) have submitted 75 more letters from a variety of organizations to the Surface Transportation Board (STB) in support of the merger between the two Class I railroads.

The STB will be responsible for approving the proposed merger, which CP and Kansas City Southern (KCS) first announced in late March. The railroads hope STB will complete its review of the merger in mid-2022. Shareholders of CP and KCS must also approve the plan.

The letters come from ports, transloading companies and shippers, according to CP and KCS, and include backing from XPO Logistics, CF Industries, Dollarama, Millar Western and Full Circle Ag, among others.

“If the Montreal Port Authority has not often spoken about railroad consolidation, we see this transaction as uniquely beneficial, with none of the downsides that might result from another round of Class I consolidation,” said a letter from Martin Imbleau, Montreal Port Authority president and CEO. Imbleau described the Port of Montreal as the second largest in Canada, and said its dock-side rail network is connected to CP.

“From a Canadian grain farmer and small shipper’s point of view this merger opens up new transportation corridors for our business and will support a change in shipping/receiving patterns. Currently most grain exports from Canada flow east or west out of the country. With this integration it will be easier to create a better Southern flow of grain exports,” said Dan Holman, general manager of Holman Farming Group, a Saskatchewan-based receiver and shipper of bulk grain and fertilizer. “Railing grain to an increased amount of destinations will give us shippers increased flexibility in finding markets for our products. We are looking forward to being able to reach new customers in North America with an integrated freight charge and no inter-switching fees.”

Holman continued, “From a fertilizer receiving company’s point of view we also support this merger. Canada is a net importer of urea, UAN, and phosphorus fertilizers. These fertilizers are mostly imported into North America from the port of New Orleans (NOLA). It is our belief that having an integrated option to bring railcars of fertilizer into Canada that arrive in North America from NOLA will allow better arbitrage of world prices to the Canadian market. This will increase the total flow of tonnes through the rail network — as lower fertilizer costs typically result in higher usage on farms.”

The additional 75 letters bring the total in support of the merger to more than 375, according to CP and KCS.

“Many of the supporters also requested the STB to review the transaction as swiftly as possible so the systems could be integrated, and the end-to-end benefits of this combination can be realized for the benefit of all stakeholders,” CP said in a release. 

Recently, almost all of the Class I railroads and a number of shipper groups asked STB to conduct a thorough review of the proposed merger using post-2001 guidelines versus another type of review that uses the pre-2001 guidelines for mergers and acquisitions between two Class I railroads. Under the “new” rules, the board would be studying the proposed merger to see whether it will enhance competition. Meanwhile, the “old” merger rules are to determine whether a merger would adversely affect current competition. CP and KCS have said that they wish for the merger review to proceed under the old rules.

KCS will release its financial results for the first quarter of 2021 this Friday. CP will release its first-quarter results on April 21.

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Click here for more FreightWaves articles by Joanna Marsh.

Joanna Marsh

Joanna is a Washington, DC-based writer covering the freight railroad industry. She has worked for Argus Media as a contributing reporter for Argus Rail Business and as a market reporter for Argus Coal Daily.

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