Canadian Pacific and Kansas City Southern combination approved by U.S. Surface Transportation Board
CP sets date for combination with KCS, announces CPKC executive leadership team
Canadian Pacific and Kansas City Southern to combine April 14 to create CPKC, the first and only single-line railway connecting the U.S., Mexico and Canada
On April 14, 2023, Canadian Pacific (“CP”) will exercise the authority granted by the U.S. Surface Transportation Board’s (“STB”) March 15 final decision and combine with Kansas City Southern (“KCS”) to create Canadian Pacific Kansas City (“CPKC”), the first and only single-line railway connecting the U.S., Mexico and Canada. CP also announced the executive leadership team that will lead CPKC.
“Our new combined railroad will create a truly unique single-line network connecting three nations and instantly injecting new competition into the North American rail industry when our supply chains have never needed it more,” said Keith Creel, CP President and CEO. “The public, environmental, competitive and safety benefits of this historic combination, clearly recognized by the U.S. Surface Transportation Board, are extraordinary for our employees, communities, rail customers and the North American economy.
“Under the leadership of the exceptional group of railroaders we announce today, CPKC will bring new options to rail customers while increasing safety, improving service and spurring new investment in our railroad network,” Mr. Creel added. “Together, all these benefits will create jobs and drive economic growth in North America.
“We acknowledge the thorough and thoughtful consideration put into the STB’s final decision, including the conditions it imposes in order to assure that the transaction’s public benefits are realized and any potential harms are avoided. We intend to participate cooperatively and proactively to assist the STB during its oversight process and will honor the conditions the STB has imposed,” Mr. Creel said.
As previously announced, Mr. Creel will become President and CEO of CPKC. The following are the anticipated future senior leaders of CPKC, subject to formal appointment by the board of directors, with the executives listed below reporting to the president and CEO:
- Nadeem Velani, Executive Vice-President and Chief Financial Officer
- John Brooks, Executive Vice-President and Chief Marketing Officer
- Mark Redd, Executive Vice-President and Chief Operating Officer
- John Orr, Executive Vice-President and Chief Transformation Officer
- James Clements, Executive Vice-President Strategic Planning & Technology
- Jeff Ellis, Executive Vice-President Chief Legal Officer and Corporate Secretary
- Warren Erdman, Executive Advisor Strategic Projects
- Laird Pitz, Senior Vice-President and Chief Risk Officer
- Mike Foran, Senior Vice-President Network & Capacity Management
- Chad Rolstad, Vice-President of Human Resources and Chief Culture Officer
- Oscar Augusto Del Cueto Cuevas, KCSM President, General Manager and Executive Representative
Pat Ottensmeyer, KCS President and CEO, has agreed to continue to be an advisor to Mr. Creel through the remainder of 2023 to ensure continuity on key initiatives predominantly involving the combined company and Mexico.
“Our senior leadership team is eager to come together to write the next chapter of railroad history in North America,” said Mr. Creel. “This experienced team will guide our work on a seamless integration for our customers, our employees and the North American supply chain.”
CP completed its US$31 billion acquisition of KCS on Dec. 14, 2021. Immediately upon the closing of that acquisition, shares of KCS were placed into a voting trust which has ensured that KCS operates independently of CP during the regulatory review process. Until CP exercises control pursuant to the STB decision of March 15 and the Voting Trust is dissolved, CP and KCS will continue to operate independently.
Headquartered in Calgary, Alta., Canada, CPKC will be the first railway connecting North America. While remaining the smallest of six U.S. Class 1 railroads by revenue, the combined company will have a much larger and more competitive network, operating approximately 20,000 miles of rail, employing close to 20,000 people. Full integration of CP and KCS is expected to happen over the next three years, unlocking the benefits of the combination.
CPKC will bring a new standard of safety to the North American rail landscape. CP has been the safest railroad in North America for 17 straight years as measured by the Federal Railroad Administration train accident frequency ratio. In 2022, CP had an all-time best frequency of 0.93, a rate nearly half what the company produced a decade ago and 69 percent lower than the Class 1 average.
CP’s culture of safety, supported by its history of sustained investments in core infrastructure and technology, aligns with KCS’s likeminded culture, allowing the combined system to operate at the apex of rail safety. CPKC will implement the combination with safety at the forefront of everything it does. In its decision approving the combination, the STB said CPKC “should ultimately enhance safety and benefit the environment.”
The STB decision also highlighted a number of other anticipated benefits:
- “The Board expects that this new single-line service will foster the growth of rail traffic, shifting approximately 64,000 truckloads annually from North America’s roads to rail, and will support investment in infrastructure, service quality, and safety.”
- ”Indeed, approval of this transaction may even enhance safety for the nation as a whole” and that “thus, any rail traffic diverted to CPKC from other railroads will likely mean traffic moving to a railroad with a better safety record.”
- “The transaction is also expected to drive employment growth across the CPKC system, adding over 800 new union-represented operating positions in the United States.”
- “The transaction will make possible improved single-line service for many shippers and will result in merger synergies that are likely to allow CPKC to be a vigorous competitor to other Class 1s by providing improved service at lower cost.”
CPKC plans capital investments in new infrastructure of more than US$275 million over the next three years to improve rail safety and capacity of the core north-south CPKC main line between Louisiana and the Upper Midwest.
Anticipated environmental benefits of CPKC include the avoidance of more than 1.6 million tons of greenhouse gas (GHG) emissions due to the anticipated improved operational efficiency of CPKC versus current operations and another 300,000 tons of GHG emissions with the diversion of 64,000 trucks to rail for a total reduction of 1.9 million tons of GHG emissions over the next five years. By diverting 64,000 long-haul truck shipments to rail annually with new CPKC intermodal services, reducing total truck vehicle miles traveled by almost 2 billion miles over the next two decades, saving US$750 million in highway maintenance costs.
CPKC will also support the expansion of Amtrak and other passenger services on the CPKC network.