Canadian Pacific to Buy Kansas City Southern in $25 Billion Railway Bet on Trade

Canadian Pacific Railway Ltd agreed on Sunday to acquire Kansas City Southern in a $25 billion cash-and-stock deal to create the first railway spanning the United States, Mexico and Canada, standing to benefit from a pick-up in trade, Reuters reported. It would be the largest ever combination of North American railways by transaction value. It comes amid a recovery in supply chains that were disrupted by the COVID-19 pandemic, and follows the ratification of the US-Mexico-Canada Agreement (USMCA) last year that removed the threat of trade tensions that had escalated under former U.S. President Donald Trump. “Think about what we’ve gone through, think about the importance in North America of near-shoring that is occurring. This network uniquely provides a supply chain that allows our customers and our partners to actually benefit from that and leverage that opportunity,” Canadian Pacific Chief Executive Keith Creel told Reuters in an interview. The combination needs the approval of the U.S. Surface Transportation Board (STB). The companies expressed confidence this would happen by the middle of 2022, given that the deal would unite the smallest of the seven so-called Class I railways in the United States, which meet in Kansas City and have no overlap in their routes. The combined railway would still be smaller than the remaining five Class I railways. The STB updated its merger regulations in 2001 to introduce a requirement that Class I railways have to show a deal is in the public interest. Yet it provided an exemption to Kansas City Southern given its small size, potentially limiting the scrutiny that its acquisition will be subjected to. Read more.