Fairly self explainatory title. CN is winning the bidding war for KCS. They are likely to sweeten the deal even further. CN has more letters of support and a CN KCS merger is also very likely to get regulatory approval according to many analyts.
This leaves the question as to what will happen to CP after the merger. CP will be left as effectively a regional railroad, about half the size of the nearest contemporary. This leaves them as a target for an opportunistic US railroad eastern or western. This could then set off the final round of consolidation for class ones.
How far do you think this will go, and what do you think the final continent-spanning megarailroads would look like?
What are your sources? I haven't seen anything that would suggest that CN has the upper hand.
https://twitter.com/TrainsMagazine/status/1392977573928394753?s=19
My source.
CN won. Does anyone want to take bets on who will buy CP? Union Pacific or CSX?
Regardless, this is pretty bad. An anticompetitive merger in the same sense as SPSF, ICG, BN, SCL and Penn Central.
So CP will become the new "KCS", a midget amongst giants. Other than the upper Midwest, they don't have a large US presence. I don't know if their Canadian lines are a big enough lure for anyone to buy them as they now are.
Aren't CN and CP Canadian (crown?) corporations? Won't the Canadian government weigh in? Do they want to see a CN mired in debt, and CP strugling to stay viable?
UNION PACIFIC CANADIAN PACIFIC LETS GOOOO
MidlandMike Aren't CN and CP Canadian (crown?) corporations? Won't the Canadian government weigh in? Do they want to see a CN mired in debt, and CP strugling to stay viable?
CN was privatized in 1995 and CP was never a crown corporation.
I think CP as we know it is now dead. There is now way they will survive alone now. Their corporate indentity not survive a merger with a larger US carrier.
It is sad to see the demise of a Canadian institution like this.
Norfolk and Western!
If you truly believe that cp will be gone then no way the STB allows this deal happens. Too many jobs will be lost. That's not pro competition and US/CANADIAN jobs will be gone.
I feature that the STB views the CP as a small transaction and the CN as a large one. With different rules applying to each.
Never too old to have a happy childhood!
CN may be winning the bidding war, but I have to believe a CN-KCS merger will have a harder time getting past the STB & DOJ's Antitrust Division than a CP-KCS merger would. I'm not saying it can't happen, but CP and KCS only touch in Kansas City, while CN and KCS at least somewhat overlap north of New Orleans and in Mississippi. Guess we'll find out.
If the STB approves a voting trust CN can buy, but not control KCS until merger approval. If the merger is later denied, CN would have to sell KCS, probably at a loss. It seems to me that under the new merger rules, CN will have to agree to a lot of conditions, possibly including line sales, to secure approval. Splitting KCS with CP makes a lot of sense and would go a long way towards addressing competitive concerns.
However, CN seems confident they can get approval and may not be willing to deal. Could we see a repeat of the Santa Fe-Southern Pacific merger attempt? SP was put in a voting trust, and the railroads were so confident of ICC approval, they started painting locos. They also didn’t agree to a lot of conditions to address concerns. They ended up having to sell SP (to Rio Grande) for what they could get.
If this does go through, I would see CP merging with CSX, NS, or UP. BNSF and CP have too many parallel lines from Chicago through Minnesota and North Dakota. Also, CP connects with UP via the old Spokane International. Though is see more competitive issues with CN/KCS than CP/KCS, if the railroads do eventually merger into 2 systems, I don't want KCS with UP, which already dominates the south central region. Therefore maybe it is better to put KCS with CN, which is more likely to end up with BNSF, provided adequate conditions for CP are agreed to.
It appears CN is the winner if the STB goes along.
http://railfan.com/report-canadian-national-preparing-to-up-offer-for-kansas-city-southern/
Still in training.
The Wall Street Journal has details. CN increased the shares to be received for each share of KCS stock and agreed to pay the $700 million breakup fee to CP.
If CP puts itself on the market, perhaps it could be "Conrailed".
CSX buys everything west of Chicago and north of Toronto and BNSF pays cash for everything east of Chicago including ownership of the former Pere Marquette.
This is like speculation for the NFL draft.
Why would CSX give up the former PM?
China will buy CP and Elon Musk will move his rocket factory to Moose Jaw, SK..
Convicted One Norfolk and Western!
Thanks to Chris / CopCarSS for my avatar.
Murphy SidingNorfolk & Pacific?
Atlantic and Pacific - Maybe they could even get permission to use the logo...
Larry Resident Microferroequinologist (at least at my house) Everyone goes home; Safety begins with you My Opinion. Standard Disclaimers Apply. No Expiration Date Come ride the rails with me! There's one thing about humility - the moment you think you've got it, you've lost it...
tree68Atlantic and Pacific - Maybe they could even get permission to use the logo...
I wonder if BNSF still holds rights to that name?
https://en.wikipedia.org/wiki/Atlantic_and_Pacific_Railroad
Didn't Trains magazine spend most of the early 2000's assuring us that north-south railroards were of small consequence?
Backshop Why would CSX give up the former PM?
In my speculation the thought is that CSX has a better route to Detroit to the south, BNSF would want a contiguous connection to their new track in Ontario, and paying for that would offset a small amount of the CSX purchase of "CP West".
All just speculating to start a conversation and see what other thoughts are out there.
Right now Warren Buffett is sitting on billions in cash, and while a whole railroad would eat up a lot of that, maybe half would be doable. BNSF running intermodal from Mexico to Toronto and Montreal would sort of be in their wheelhouse. They could call it the Canamex Transcon or something like that.
CP/UP - Chicago-Clinton and CP Clinton-KC provides a more direct Chicago-KC line than either has alone, not counting UP's trackage rights on BNSF, which is only for intermodal and automotive. This extends the Golden State Route to Chicago, where RI had it in the first place! Also, traffic coming out of Western Canada or the Dakotas can avoid Chicago congestion by taking CP to Clinton and then UP to St Louis for CSX or NS interchange. The direction reversal at Clinton would not be a major issue with distributed power. However, there is some overlap in the Midwest that would have to be addressed by allowing a competitor in.
CP/NS - Traffic between Western Canada and Southeastern US could avoid Chicago by using CP from St Paul to Davenport and NS' rights on Iowa Interstate to Peoria or the south side of Chicagoland. Maybe this doesn't avoid Chicago completely, but using IAIS avoids a long slow trip down from Bensenville.
I don't see a lot of overlap between CP and NS or CSX. However, they would have to show that competition is increased so concessions to other RRs would be necessary.
DoJ says CN Rail bid for KC Southern poses greater risk to competition May 14, 2021 7:27 PM
ETCanadian National Railway Company (CNI)By: Carl Surran, SA News Editor10 Comments Canadian National Railway's (NYSE:CNI) takeover bid for Kansas City Southern (NYSE:KSU) appears to pose greater risks to competition than a rival deal with Canadian Pacific Railway (NYSE:CP), the U.S. Department of Justice says in a filing with the U.S. Surface Transportation Board.
"A CN-KCS transaction poses additional dangers to competition stemming from the potential elimination of direct, 'parallel' competition on routes served by both railroads, for example between Baton Rouge and New Orleans," the DoJ says.
CP Rail says it "concurs with the DoJ's objection to CN's application for proposed use of a voting trust on the grounds that a CN merger with KCS would pose greater risks to competition."
"The DoJ's position is consistent with CP's assessment that CN's proposal is illusory and offers unattainable value to KCS shareholders."
Kansas City Southern yesterday accepted CN Rail's $33.6B takeover offer as "superior" to CP Rail's previous $29B deal.
Wow, looks like CP will get that $700 million and now possibly KCS.
I come down in favor of the CN. As a former ICG marketing type I know the only significant competitive overlap for a CN/KCS combination is the 65 miles between Baton Rouge and New Orleans.
On that 65 miles duplicate lines of both railroads serve major shippers jointly. These shippers are refineries and petrochemical plants. KCS and CN compete for this business. Combining KCS with CN would eliminate this competition.
CN is aware of this and is willing to mitigate the issue by divesting the KCS line between Baton Rouge and New Orleans if need be. (See Bill Stephens' very good article on the merger in July Trains.)
Aside from that, what's wrong with KCS accepting CN's superior bid? The US Department of Justice doesn't know a thing about transportation in general or railroading in particular.
LANDON ROWELLHowever, CN seems confident they can get approval and may not be willing to deal. Could we see a repeat of the Santa Fe-Southern Pacific merger attempt? SP was put in a voting trust, and the railroads were so confident of ICC approval, they started painting locos. They also didn’t agree to a lot of conditions to address concerns. They ended up having to sell SP (to Rio Grande) for what they could get.
The ICC had the power to nix the SP/SF merger. How many mergers has the STB stood in the way of?
MidlandMike The ICC had the power to nix the SP/SF merger. How many mergers has the STB stood in the way of?
The former merger rules implemented as part of The Staggers Act rail regulation reform were written to promote mergers. At the time there were many failing railroads and the idea was to allow them to merge to get economies of scale benefits and stay in business as a transportation option. Several dozen Class I railroads merged down to 7 by about 1996.
In 1999 BNSF and CN proposed a merger. It likely would have triggered the dominos down to two systems across North America with a potential long term risk of many captive shipper situations developing.
At that time the STB put a hold on any merger application reviews to write new merger rules to ensure that future mergers would enhance competition.
The new rules applied to all Class I railroads except KCS, which was much smaller at the time and so was grandfathered in under the old rules.
While the STB technically did not rule against the BNSF-CN merger, when the new rules were published, BNSF and CN pulled their merger application and the seven-Class-I status quo was maintained.
Looks like CP will get a cool $700 million and KCS....
Kansas City Southern falls after regulator says merger waiver provision does not apply to Canadian National offer May 17, 2021 2:46 PM ETKansas City Southern (KSU)By: Clark Schultz, SA News Editor6 Comments Kansas City Southern (KSU -2.8%) is having a volatile session after the Surface Transportation Board said its merger rules apply to the company's proposed combination with Canadian National Railway (CNI +1.7%). Canadian Pacific Railway (CP -1.6%) had landed a petition for its deal with KSU to be exempt from the STB merger rules, however the agency determined that the application of the waiver provision to the CN-Kansas City transaction is not warranted. Late on Friday, the DOJ said the CN Rail bid for Kansas City Southern poses greater risk to competition than the CP deal. Analysts expects many swings back and forth for KSU, CNI and CP as the merger drama plays on. Shares of Kansas City Southern are still up more than 50% YTD on optimism that a merger deal of some sort will make it to the finish line.
Agree that CN is not going to get KCS even with a superior bid. CP might sweeten it's bid but if I were CP I would stand with the current offer and not increase it. I think all along CN's strategy was to try and load up CP with debt rather than possess KCS. Pretty confident CP will get KCS at this point and CN will be left with it's current system and no concessions from CP.
Saw the STB applying the 'Big Merger' to CN when the initially made thier 'bid'. The CP-KCS deal leaves the apperarance of competition N-S in middle America. CN-KCS does not.
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