Canada to Mexico with one railroad – Canadian Pacific to buy Kansas City Southern in deal worth $29 billion

CANADIAN Pacific has announced plans to buy fellow US Class 1 railroad Kansas City Southern Railway (KCS) in a deal worth $29 billion.

If the deal – which is supported by both companies – is approved by regulators, it will create a tri-national freight operator linking Canadian cities with those in Mexico.

KCS is a major operator in Mexico, having founded and later bought outright the Transportación Maritima Mexicana 50-year concession, which was renamed Kansas City Southern de México in 2005. KCS also owns half the Panama Canal Railway Company, operating ocean-to-ocean freight and passenger services along the Panama Canal.

Expanded

Canadian Pacific (CP) built the first trans-continental railway across Canada, which opened in 1885 and in recent decades has expanded its operations in the US by buying smaller freight railroads giving access to cities such as New York and Chicago.

CP has previously attempted other mergers with American Class 1 railroads, but these were rejected by American regulators. A decision on the KCS deal is not expected before 2022.

While the merged ‘Canadian Pacific Kansas City Railway’ will still be the smallest of the North American Class 1 railroads when measured by revenue, it will have a network of more than 32,000km, uniquely connecting Mexico, the US and Canada, with revenues of about $8.7 billion.

New business

The merger is expected to create opportunities for rail freight to win new business from road transport and possibly oil transportation as expansion of pipelines from Canada to the US has been blocked.

While CP locomotives are already seen in parts of the US, the merger should see CP locos working all the way from Canada to Mexico and potentially KCS locos working into Canada.

KEITH FENDER KCS uses its attractive yellow, black and red livery on locos in both the US and Mexico; a pair of KCS SD70 ACe locos led by No. 4042 head a freight with two CSX locos on the Public Belt railroad beside the Mississippi in the centre of New Orleans on January 21, 2009. A New Orleans streetcar on the ‘Riverfront line’ is on the right.