US railway giants merge to create first Canada-US-Mexico network
Canadian Pacific (CP) and Kansas City Southern (KCS), two of the largest railway companies in the United States, finalised a merger that will result in a new company called Canadian Pacific Kansas City (CPKC). This union will create the first railway network connecting Canada, the US, and Mexico, which will stretch for over 32,000 kilometres.
CP’s network crosses southern Canada from Vancouver to the Bay of Fundy with connections in the northeast of the United States. KCS, on the other hand, can count on a network through the southern part of the country all the way to the Mexican port of Lazaro Cardenas. As the map below shows, the two companies’ current networks overlap in Kansas City, at the heart of the United States.
Connecting Canada to Mexico will be advantageous for all countries involved, as CP pointed out. The company said that the Canadian market can count on 128 million consumers in Mexico as well as new market opportunities in Kansas City and Texas. On the other hand, the Mexican market appeals to 38 million consumers in Canada and will benefit from new connections in Louisiana, Chicago, and Detroit. The new network also allows bypassing Chicago, thus creating new capacity on US railways.
A new company to boost modal shift and improve safety
The agreement for the merger was first announced in March 2021 and completed the following December. Now that the STP has given its approval, the initiative can be finalised with the creation of CPKC. More specifically, CP is acquiring KCS for a little over 29 billion euros. CP and KCS are the two smallest Class I railway companies in the US. The new CPKC will still be the smallest of the group, when it comes to revenue, but will be able to rely on a much larger network, as CP pointed out.
The decision for the merger was recently approved by the US Surface Transportation Board (STB) and will be effective as of 14 April. The STB claimed it expects the merger to shift around 64,000 trucks from North America’s roads to the rail. The Board also pointed out that this union could enhance rail safety in the United States since CP has been nominated the safest railway company in North America by the Federal Railroad Administration for 17 years in a row.