Date: Wednesday, March 15, 2023
Source: Supply Chain Dive
Federal regulators on Wednesday approved Canadian Pacific Railway’s $31 billion deal to buy Kansas City Southern, paving the way for the first single-line railroad linking the United States, Mexico and Canada.
The deal will create a new system set to be known as Canadian Pacific Kansas City. The acquisition, first announced March 2021, set off anti-competition concerns including from the U.S. Department of Justice.
The Surface Transportation Board said in its decision that the combined companies, set to be known as Canadian Pacific Kansas City, will help grow rail traffic, “shifting approximately 64,000 truckloads annually from North America’s roads to rail.”
In January, the Department of Justice sent the STB a letter in late January asking the board to consider whether further consolidation in the rail industry would impact competition and service, especially “in light of the recent supply chain disruptions that have wreaked havoc on American consumers and businesses.”
Addressing competition concerns in its decision, STB said that Canadian Pacific and Kansas City Southern are individually smaller than the other five Class I railroads. Even after the deal goes through, the combined company will “continue to be the smallest Class I railroad.”
The board, however, will impose a number of conditions on the final merger to protect competition, including the obligation to keep connection points between CPKC and other railroads open, “preserving efficient routing options via other railroads that were available to shippers before the merger.”
The STB will also establish an “unprecedented seven-year oversight period” in addition to data-reporting requirements. And, upon customer request, CPKC will also have to justify rate increases over a certain level on interline movements.
“This decision seeks to enable a more efficient and competitive CPKC system, while minimizing CPKC’s ability to wield its new market power to the detriment of its shippers.”
Regulators are set to speak more about the acquisition at a press conference late Wednesday morning.