Friday marks the first day of Canadian Pacific Kansas City (CPKC), the combined company of Canadian Pacific (NYSE: CP) and Kansas City Southern, and ends the journey that officially started just over two years ago in March 2021 when CP first declared publicly its interest in merging with KCS.
“Today, we celebrate this historic combination creating a truly unique single-line rail network that begins a new chapter of railroad history in North America,” CPKC President and Chief Executive Officer Keith Creel said in a news release. “As we mark this once-in-a-lifetime occasion by driving the Final Spike in Kansas City, Missouri, where CP and KCS come together, we stand ready to bring new competition into the North American rail industry at a time when our supply chains have never needed it more.”
The combined network will span across both coasts of Canada, traverse through the U.S. Midwest and reach several points in Mexico, including the Port of Lázaro Cárdenas on Mexico’s Pacific coast. CP has said the network offers single-line service to shippers.
“This unmatched CPKC network will give our customers new options and expanded reach to more markets as we provide reliable rail service, take trucks off public roads and raise the bar on rail safety by expanding CP’s industry-leading safety practices,” Creel said. “The public, environmental, competitive and safety benefits of this historic combination are extraordinary for our railroaders, communities, rail customers and the North American economy.”
CPKC’s headquarters will be in Calgary, Alberta, although CP has said previously that it would maintain key KCS offices in the U.S.
The network will include approximately 20,000 miles of rail, and integration of both companies is expected to take over three years. CP also reiterated that it plans to spend more than $275 million to improve rail safety and capacity on the core north-south CPKC main line between the U.S. Upper Midwest and Louisiana.
CP has also calculated that approximately 64,000 long-haul truck shipments could be diverted annually to CPKC’s intermodal services. The railway has been conducting test runs between the Midwest and Mexico on an interline basis, officials said during CP’s fourth-quarter 2022 earnings call in January. This included testing southbound trains hauling temperature-controlled products from the Midwest markets to Laredo, Texas, as well as testing northbound lanes for service-sensitive products to markets in the Upper Midwest and into Canada.
“We stand ready to move the commerce of today and ready to compete hard to grow tomorrow,” Creel said Friday. “With the most relevant railroad network on the continent, we’ll create value for all stakeholders, bringing new jobs, economic growth and environmental benefits to workers, customers and communities.”
Shareholders of CP and KCS approved the $31 billion merger in December 2021 after both companies filed their merger application with the Surface Transportation Board on Oct. 29, 2021. The board received nearly 2,000 comments from public hearings on the plan. It also received comments when STB produced an environmental impact statement on the merger.
STB approved the merger last month. In doing so, the number of Class I railroads would go down to six from seven once the merger became complete, stoking speculation on whether this would be the last merger between two Class I railroads since the industry experienced a fair amount of consolidations since 1980.
CP’s pursuit of the merger wasn’t completely smooth sailing. CP rival CN (NYSE: CNI) had also sought to merge with KCS in April 2021, but that pursuit ended when it was deemed that the regulatory hurdles were too high.
The websites for CP and KCS are still accessible, although both companies also link to their new website for CPKC.
Subscribe to FreightWaves’ e-newsletters and get the latest insights on freight right in your inbox.
Click here for more FreightWaves articles by Joanna Marsh.