NEARS: CP’s Keith Creel Chats

28.April, NEARS Spring 2021 Virtual Conference – In a Fireside Chat hosted by Cowen & Company’s Jason Seidl, Keith Creel discussed CP’s purpose and strategy regarding its bid for KCS, and addressed New England-oriented audience questions posed by Atlantic Northeast Rails & Ports. Key takeaways:

CP is not going to get in to a bidding war

Creel acknowledged that, while CP is plenty big enough to maintain and improve the KCS system, CN is still bigger, and ultimately has more cash to throw at anything. He characterized CP’s ~$25 billion stock-heavy play for KCS as evolving into a much greater value for KCS shareholders than CN’s ~$30 billion cash bid.

 “We are smaller, but [can more quickly create new] value across the entire supply chain. … [Our bid] allows both companies and all sets of stakeholders to share in that value creation.”

Creel described CP’s interest in KCS as having been conceived in virtue (“Started as interline discussions”), free of regulatory snags, (2001 waiver), and more immediately efficient (“Any combination that has to start with divestments probably isn’t a good idea” – alluding to CN’s existing lines paralleling KCS).

More service options, rather than fewer

“Any combination that creates more service options [and] more competition is good for our industries,” (alluding to CN’s existing service between Chicago and Texas)

Not choking on Chicago

“A quarter of [the total car-count] that moves in North America is going to go through [Chicago] … [It] is a fragile town … [and] it’s always going to be subject to weather.”

“Our primary route would [run on] the west side of the Mississipi river (i.e., around Chicago). [Putting] more pressure on Chicago when it’s not necessary is not in the best interests of shippers.”

Labor on board

“Our [KCS strategy is] about new growth … [that will] require additional headcount … driven by [new] business and justified by the business.”

“[In the past, we] created some ill will [with Labor]. We had to make some tough decisions. Since then, we’ve evolved to growth, [and] we’ve worked hard to rebuild those bridges. When you have labor seeing those opportunities and when you have relationships you’ve earned, that matters.”

ANRP brings attention to Northeast issues

Creel opened his Q&A session with two questions posed by Atlantic Northeast Rails & Ports. Asked about integrating Searsport ME into CP’s network, Creel responded that developments there have not yet met original objectives, but that the company will continue to seek and create growth opportunities.

Asked about the looming Port of Montreal strike, Creel said that he hoped the disagreement could be resolved quickly, but that CP was not as vulnerable to a strike as it had been last year, thanks to a permanent shift of substantial CP container traffic to Saint John.

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