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CP Rail, Kansas City Southern Rail merger now official

Merger is the continent’s first major one in the industry in more than two decades
Canadian Pacific Railway trains sit at the main CP Rail trainyard in Toronto on Monday, March 21, 2022. Canadian Pacific Railway Ltd. and Kansas City Southern have officially combined to create Canadian Pacific Kansas City. THE CANADIAN PRESS/Nathan Denette

The merger of Canadian Pacific Railway Ltd. with Kansas City Southern Railway Co. is now official.

The fusion, under the banner of Canadian Pacific Kansas City, marks the continent’s first major railroad rail merger in more than two decades.

It combines the two smallest of North America’s seven Class 1 railroads, after the U.S. rail regulator approved the US$31-billion deal last month.

That green light cleared the final hurdle in CP Rail’s bid to buy KCS and create the only railway stretching from Canada through to the U.S. and Mexico.

U.S. Surface Transportation Board chair Martin Oberman said in March the combined company will speed up freight travel time and encourage tighter competition with the other five, larger railways.

CP competitor Canadian National Railway Co. had fought a long battle over the acquisition before CP sealed the deal in December 2021. CN had wooed KCS away from an initial CP offer with a US$33.6-billion proposal in May 2021 before the U.S. regulator rejected CN’s bid in August of that year.

Stretching from Vancouver and Saint John, N.B., to Houston and Mexico City, the new Canadian Pacific Kansas City network will operate almost 33,000 kilometres of rail and employ nearly 20,000 people.

The company said Friday it will mark the occasion by driving a ceremonial final spike in Kansas City, Mo., where the two railways meet. It is also slated to break ground on a new yard office that will host its U.S. operations centre.

CPKC’s shares in the railway will remain listed on the Toronto Stock Exchange and New York Stock Exchange under the ticker symbol CP and are expected to begin trading under the new moniker on Tuesday, the company said.

“This unmatched CPKC network will give our customers new options and expanded reach to more markets as we provide reliable rail service, take trucks off public roads and raise the bar on rail safety by expanding CP’s industry-leading safety practices,” CPKC chief executive Keith Creel — who led CP Rail’s acquisition effort — said in a release.

Conditions on the deal include keeping connection points between the CPKC system and other railways open on “commercially reasonable terms” and formally justifying any rate increases over a certain level on interline movements, according to the U.S. regulator.

READ MORE: CP Rail signs deal to buy Kansas City Southern for US$25 billion