CP: VRS, G&W Join Shippers and Railroads to Support KCS Merger

The combined CP, KCS system would connect the Northeast with the Midwest and Mexico.

31.March – Calgary AB and Kansas City MO – Canadian Pacific Railway Limited and Kansas City Southern   today announced they have received statements from nearly 260 shippers, other railroads, economic development authorities, ports, and other supporters for their planned combination that would create the first rail network connecting the U.S., Mexico, and Canada.

Many of these supporters requested the Surface Transportation Board (“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.

The statements and letters were filed with the STB.

VRS Joins Growing List of Supporters

Major shippers and supporters across North American regions and industries – including Maersk, Hyundai Glovis, Kraft, Nestlé, Hapag-Lloyd, North Dakota Grain Dealers Association, Evergreen, Boise Cascade Wood Products Building Materials, Ragasa Industrias S.A., and Ag Processing – stated they expect the combination would, among other benefits, invigorate transportation competition, expand access to existing and growing markets, and provide new service offerings that would improve transit times and reliability. In addition, the nation’s largest short-line holding railroad company, Genesee & Wyoming, has filed in support of the combination, as well as other short-line railroads, including Vermont Rail System.

VRS would potentially see the opportunity for new seamless traffic on a single-carrier haul from New England to the Midwest and even into or out of Mexico under the proposed transaction.  CP and KCS tout a seamless connection in Kansas City, MO with no overlap and one railroad to handle traffic.  CP and KCS together would connect customers via single-network transportation offerings between points on CP’s system throughout Canada, the U.S. Midwest, and the U.S. Northeast and points on KCS’ system throughout Mexico and the South Central U.S.

From the VRS President, Selden Houghton:

From our perspective, the proposed transaction promises to provide improved service options and transportation competition in the markets we serve. VRS handles inbound grain traffic from the Midwest, as well as traffic that terminates in Mexico. The current VRS traffic destined for Mexico is interchanged from CP to KCS in Kansas City, and a combined CPKC network – with new single-line hauls and access to ports on the U.S. Gulf, Atlantic and Pacific coasts as well as to key overseas markets – could improve efficiency in this existing lane of business and open opportunities for business growth.

In addition, we are particularly enthusiastic about the role that new CPKC single-line routes could play in expanding access to growing markets across the United States, Mexico and Canada under the USMCA trade agreement. While VRS understands that KCS and CP have had a cooperative relationship in the past, as separate companies they have not been able to offer the kind of seamless, single-line service we seek from our transportation providers so the transaction proposed should be an improvement for our customers. Given the straightforward network connectivity between CP and KCS, we believe that they should be able to implement their transaction without service disruptions.

Seamless Combination, Enhanced Competitive Alternative

The CP-KCS combination is expected to provide an enhanced competitive alternative to existing rail service providers and is expected to result in improved service to customers of all sizes. Grain, automotive, auto-parts, energy, intermodal, and other shippers, would benefit from the increased efficiency and simplicity of the combined network, which is expected to spur greater rail-to-rail competition and support customers in growing their rail volumes. The single integrated rail system would also connect premier ports on the U.S. Gulf, Atlantic and Pacific coasts with key overseas markets.

While remaining the smallest of six U.S. Class 1 railroads by revenue, the combined company would be a much larger and more competitive network. The transaction is also expected to create jobs across the combined network. Additionally, efficiency and service improvements are expected to achieve meaningful environmental benefits.

CP is seeking approval from the STB for the combination, which also remains subject to the approvals of CP and KCS shareholders and other customary closing conditions. The STB review is expected to be completed by the middle of 2022.

In addition to the rail companies listed here, multiple Northeast Shippers have also chimed in with support for the deal.

The full list of support documentation is listed at: CP-KCS Merger Support Statement Letters