Canadian Pacific Railway (CP) and Kansas City Southern (KCS) have taken a significant step toward creating the first rail network connecting Canada, the United States, and Mexico by submitting their merger application to the U.S. Surface Transportation Board (STB). The proposed $31 billion deal would establish Canadian Pacific Kansas City (CPKC), a transportation powerhouse positioned to reshape North American supply chains.
A Transformative Rail Network
The merger application outlines operational plans for integrating the two rail networks, analyzing financial impacts and labor requirements while emphasizing competitive advantages for shippers. The combined entity would create seamless north-south trade corridors supporting increasingly interconnected supply chains under the USMCA trade agreement.
CP President and CEO Keith Creel described the merger as "a unique, pro-competitive combination and a once-in-a-lifetime partnership." He emphasized that CPKC would inject new competition and capacity into the U.S. rail network while promoting trade flows, enhancing safety, creating jobs, and potentially enabling new passenger services.
Regulatory Process Underway
The transaction remains subject to shareholder approvals and regulatory clearances, including from Mexican authorities. STB will review the proposal under pre-2001 merger rules, with a decision expected in the second half of 2022. The board will also examine whether to maintain KCS's current exemption from stricter merger regulations.
KCS President and CEO Patrick Ottensmeyer highlighted the growth potential of combining two of the industry's fastest-expanding railroads: "CPKC will provide new routes, reach broader markets, and create additional transportation options while competing vigorously with other railroads, trucks, and transportation providers."
Strategic Advantages
Executives from both companies emphasized several key benefits during recent presentations:
- Enhanced Efficiency: Single-line service across three nations would eliminate interchange delays and streamline cross-border movements
- Environmental Benefits: Shifting freight from trucks to rail would significantly reduce carbon emissions
- Economic Growth: The network could help attract manufacturing investment back to North America
- Competitive Pricing: Truck-competitive service options would provide cost savings for shippers
- Port Connectivity: Improved access to major North American gateways for global trade
Addressing Supply Chain Challenges
Creel noted that pandemic-related supply chain disruptions demonstrated the need for more resilient transportation networks. "This combination creates stability and opportunity for our customers in the North American transportation network," he stated.
Ottensmeyer added that the merger would unlock new infrastructure investments while creating environmentally preferable transportation choices. The combined network's unique three-nation footprint would position it to capitalize on USMCA-driven trade growth and North American industrial recovery.
If approved, CPKC would remain the smallest Class I railroad by revenue while introducing new competition to the North American rail landscape. The merger represents one of the most significant transportation developments since the implementation of the USMCA trade agreement.