Keith Creel.
Keith Creel, CP President and CEO - Date? Photographer?
Calgary Herald.
As Ultra-Marathon Ends CP's Creel Takes Next Steps in US$31 Billion Railway Takeover
17 March 2023

Calgary Alberta - It's been almost two years since Canadian Pacific Railway (CP) CEO Keith Creel led the company on a new corporate journey.
 
He unveiled big plans to take over Kansas City Southern (KCS) and create a north-south rail network stretching from this country to Mexico.
 
After many twists and turns, and almost losing out to rival Canadian National Railway (CN) to acquire the smaller U.S. railway company, regulatory approval from the U.S. Surface Transportation Board (STB) was finally granted on Wednesday .
 
The US$31 billion union between the two smallest Class 1 railways in Canada and the United States is now chugging forward.
 
"We are elated. The weight of the history of this moment is very, very, material and important," Creel said Thursday at the J.P. Morgan Industrials Conference.
 
"I think I just ran an ultra-marathon with the STB process, two years, a very thoughtful, thorough, process."
 
The gruelling journey began in March 2021 as Calgary based CP rolled out terms of a friendly merger with KCS.
 
The deal aims to create a larger railway network capable of transporting an array of goods between Canada, the United States, and Mexico.
 
The railway's overall system will have direct access to 11 ports on the east and west coasts in the three countries.
 
KCS investors approved the deal at the end of 2021, after a brief courtship with CN that later fell apart, and shares in the U.S. firm were placed in an independent voting trust, pending the regulatory review.
 
This week's decision will soon give CP the ability to exercise control of KCS by mid-April, and proceed with Creel's broader strategy to create a railway easily connecting customers in North America.
 
The takeover is expected to create annual synergies of about $1 billion over three years.
 
"This isn't about slashing costs. It isn't about stopping investment. We will position this company, this franchise, to grow, and I believe this will be the last spike," Creel said.
 
"I don't think this industry is going to see more consolidation. I think that we're going to be a stabilizing force in this industry."
 
The company will be renamed Canadian Pacific Kansas City (CPKC) and its corporate headquarters will remain in Calgary.
 
The combined businesses will have almost 20,000 employees and 32,000 kilometres of track.
 
It's expected CPKC will add more than 1,000 union positions across North America to accommodate expected growth, including 800 jobs in the U.S.
 
The company has more than 2,000 workers in the Calgary area, home to its largest base of employees.
 
ATB Capital Markets analyst Chris Murray called the approval a "clean decision" that clears the decks with only minimal conditions, as the STB rejected calls for mandatory divestitures.
 
"Now you can build an end-to-end North American railroad that lets you go right from the ports in Mexico, right through the central part of the U.S., up into Eastern Canada, and into Western Canada," Murray said.
 
"It's a pretty exciting time for a once-in-a-generation-type transformation."
 
The STB considered the effect of the merger on competition, concluding there's little overlap between the two railways as they only connect in Kansas City.
 
The merger will lead to improved safety, reduced travel time for traffic moving along the single-line service, and increased incentives for further investment.
 
The combined companies will also lower emissions by attracting more freight to move off trucks.
 
"On balance, the merger of these two railroads will benefit the American economy," STB chair Martin Oberman told reporters.
 
The ruling includes a seven-year oversight period of the merged operations.
 
As the first single-line railway service from Canada to Mexico, shippers of auto parts, grain, and other freight will be able to expand their market reach, it found.
 
"It opens up new markets and new directions. It's really been an east-west focused industry," said Anthony Hatch, an independent New York-based transportation analyst with ABH Consulting.
 
"It fits the trends. Mexico has been growing as a rail market, well before the phrase near-shoring existed."
 
The deal should also solidify Calgary's position as a growing transportation and logistics hub in Western Canada.
 
The city is home to one of the country's largest international airports and the headquarters of WestJet and Lynx Air, as well as plane manufacturer De Havilland Aircraft of Canada, and it has connections to two railways and major highways.
 
"There's this ability for people to move their goods and products, easily and seamlessly, and they have a multitude of options, whether it's rail, air, or roads," said Calgary Economic Development CEO Brad Parry.
 
After speaking at Thursday's conference, Creel intended to head to Kansas City to have a town hall meeting on Friday morning to talk with employees at KCS.
 
He'll then hop on a plane for Calgary to meet with CP workers in Canada, and continue the journey.
 
"In the next several years, I'm going to spend probably 75, 80 percent of my time in Kansas City and on the KCS network because I'm a boots-on-the-ground railroader," he said.
 
"People will be the first focus. After that, we're making sure that we integrate right out of the gate, with the right culture and focus on people."
 
Chris Varcoe.

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