I don't have problems with STB requiring keeping interchanges open, at least if it has reasonable usage. Jackson maybe has competative advantage at the present, but if CPKC single service now has the advantage, then the competition landscape has changed, but all are still free to compete. CPKC makes one more viable route from the Chicago area to the Gulf, in addition to CN, UP, and BNSF. It's up to the STB to decide if the merger enhances that competition.
MidlandMike Juniata Man ... In line with that; CPKC could also choose to maintain these interchanges but, price traffic moving over them in such a manner the interchange is effectively no longer an option. In other words, CPKC could set interline revenue requirements so high it prices the CN route out of existence. It seems the only interchange that would be effected is the St. Louis/Springfield area (the more southerly interchanges would leave KCS short-hauling themselves.) CPKC says they will maintain interchanges. STB seems to be interested in getting more into rate cases. Overall I think CPKC will make a more balanced competition betweem CP and CN. It will also make them possibly more competitive with UP and BNSF in that lane.
Juniata Man ... In line with that; CPKC could also choose to maintain these interchanges but, price traffic moving over them in such a manner the interchange is effectively no longer an option. In other words, CPKC could set interline revenue requirements so high it prices the CN route out of existence.
It seems the only interchange that would be effected is the St. Louis/Springfield area (the more southerly interchanges would leave KCS short-hauling themselves.) CPKC says they will maintain interchanges. STB seems to be interested in getting more into rate cases. Overall I think CPKC will make a more balanced competition betweem CP and CN. It will also make them possibly more competitive with UP and BNSF in that lane.
Mike; Jackson, MS is the primary CN/KCS interchange currently for traffic to or from Canada.And note that simply keeping an interchange open doesn't necessarily mean it will remain a viable interchange. CPKC will need to keep revenue requirements over these interchanges at the same competitive levels as at present. I'd be surprised if the Board doesn't set conditions along those lines though as I know several shipper organizations have expressed concern in that regard.
CW
Juniata Man... In line with that; CPKC could also choose to maintain these interchanges but, price traffic moving over them in such a manner the interchange is effectively no longer an option. In other words, CPKC could set interline revenue requirements so high it prices the CN route out of existence.
MidlandMike longhorn1969 I hope not, I hope the DOJ or STB shoots it down. Biden Administration talks about wanting competion, you can't have that and let the North American market loose another major railroad. CP and KCS didn't overlap or compete against each other. How does this merger lessen competion?
longhorn1969 I hope not, I hope the DOJ or STB shoots it down. Biden Administration talks about wanting competion, you can't have that and let the North American market loose another major railroad.
CP and KCS didn't overlap or compete against each other. How does this merger lessen competion?
If CPKC closes existing interchanges with other railroads, that could have an anticompetitive impact.
A specific concern I have involves traffic moving from current KCS served points to destinations in Canada currently open to interswitching. Since CP can serve many CN switched businesses in Canada through interswitching, closure of KCS / CN interchanges in the US would have a definite anticompetitive impact on traffic moving in these lanes currently. It would force traffic off the KCS / CN routing and onto a CPKC route. And in the railroad world, same as in the real world, not having a choice of service provider translates into a higher cost.
In line with that; CPKC could also choose to maintain these interchanges but, price traffic moving over them in such a manner the interchange is effectively no longer an option. In other words, CPKC could set interline revenue requirements so high it prices the CN route out of existence.
Investor Presentation 09/16/21:
https://futureforfreight.com/wp-content/uploads/2021/09/2021.09.16-CP-KCS-Investor-Presentation_v34.pdf
Here is a somewhat comprehensive summary of the acquisition game plan at the corporate level.
https://futureforfreight.com/canadian-pacific-and-kansas-city-southern-execute-agreement-to-combine-creating-first-single-line-rail-network-linking-u-s-mexico-canada/
longhorn1969I hope not, I hope the DOJ or STB shoots it down. Biden Administration talks about wanting competion, you can't have that and let the North American market loose another major railroad.
Lithonia Operator Here's Trains' article. https://www.trains.com/trn/news-reviews/news-wire/canadian-national-drops-pursuit-of-kcs-clearing-way-for-canadian-pacific-kcs-merger/ How long do you think the STB will take to make a ruling on this? Do folks think it will eventually get approved? I see where the CSX-PanAm deal has hit snags.
Here's Trains' article.
https://www.trains.com/trn/news-reviews/news-wire/canadian-national-drops-pursuit-of-kcs-clearing-way-for-canadian-pacific-kcs-merger/
How long do you think the STB will take to make a ruling on this? Do folks think it will eventually get approved?
I see where the CSX-PanAm deal has hit snags.
I hope not, I hope the DOJ or STB shoots it down. Biden Administration talks about wanting competion, you can't have that and let the North American market loose another major railroad.
Its like the airlines now stating they can make profits because they merged. No,its because they stopped chasing market share and found yield discipline that had been preache for the past 30 years.
Yeah, I hope the Biden adminstration blows this thing up. The present stockholders will get their payday and the CP would have to divest of KCS back on the market.
The pre-2001 merger rules were much more aligned with the approval of mergers as a benefit of the Staggers Act to help railroads stay strong and survive, as long as there was not some humungous show stopper of anti-competitiveness.
The post-2001 merger rules were written to better preserve and enhance competition, but a combination with KCS was specifically exempted to some degree from the post-2001 merger rules, though not completely.
The STB seeing the two smallest railroads merging to ostensibly make themselves into a stronger healther single system prompted them to rule that they will review the CP-KCS merger under the pre-2001 merger rules.
The STB seeing the merger of one of the larger systems - CN - with KCS and the potential for spinning off or downgrading a significant portion of KCS trackage, which would reduce competition, prompted them to rule that they would have reviewed the CN-KCS merger under the post-2001 merger rules.
CP-KCS has a very good chance of succeeding, it would appear, because the combined system will be able to compete completely in North American lanes with CN.
I'm pretty sure the STB already ruled that CP-KCS would NOT be considered a major merger and thus would get a lower level of scrutiny during the approval process. CN-KCS was considered a major merger, subject to increased scrutiny, and that is pretty much what torpedoed their merger.
I suppose the STB might find some reason to rule against it, but they have more or less signaled that it will go through without issue on their end.
Still in training.
CPKC is back on officially today.
https://www.kcsouthern.com/media/news/news-releases/kansas-city-southern-terminates-canadian-national-railway-merger-agreement-and-is-entering-into-merger-agreement-with-canadian-pacific-railway
The KCS Board has indicated that the $300 per share offer of CP can be deemed a superior proposal to the CN proposal and KC will begin exploratory work on a potential merger with CP.
https://www.kcsouthern.com/media/news/news-releases/kansas-city-southern-board-of-directors-determines-proposal-from-canadian-pacific-railway-could-reasonably-be-expected-to-lead-to-a-superior-proposal
I respect CP for not making their higher offer contingent on the STB approving CN's voting trust.
The important date is, and remains, the KCS atockholder's meeting (I'm presuming that despite the STB's statement, they made sure to rule on this ahead of the meeting date). The offer extends a week past that meeting, presumably to allow finalization of acceptance if that is agreed at the meeting.
https://apps.online.computershare.com/MeetingsShareholderWeb/Home?Code=MUKQC2H&Invitation=&Locale=en
kgbw49CP is the horse on the inside rail now. The pre-2001 merger rules were very pro-merger and in fact the STB specifically allowed for a KCS exemption in 2001 for potential use of those pre-2001 rules.
We'll know on Sept 12th. CP stated it's offer expires on Sept 12th which strangely enough is a Sunday so I wonder if I have that date correct. However, CP indicated the higher offer is off the table start of business on Sept 13th.
CP is the horse on the inside rail now. The pre-2001 merger rules were very pro-merger and in fact the STB specifically allowed for a KCS exemption in 2001 for potential use of those pre-2001 rules.
CP's offer only makes sense if the STB rejects CN's application for a Voting Trust. If CN's Voting Trust is denied then there is a much higher probability that the STB will deny CN's attempt to merge with KCS. If CN's Voting Trust is denied at best KCS's shareholders will have to wait at least a year for their money, and they are risking serious losses if CN's deal is completely rejected. If the CN Voting Trust is rejected KCS could take CP's offer and get their money much sooner, perhaps in as little as a month or less.
The STB has already approved the CP-KCS voting trust using the pre-2001 rules. That is important because the pre-2001 rules were pro-merger.
The STB has not yet approved the CN-KCS voting trust, and several US Government agencies as well as the House Transportation Committee have come out against it.
So CP sweetening the deal to the KCS stockholders gives them a chance for a decision either taking more "bird in hand" cash and a merger with an easier path to approval (CP-KCS) versus one with additional money but a much bigger risk that it will never happen (CN-KCS).
We may yet see red locomotives labeled Canadian Pacific de Mexico.
Here is a web site where Canadian Pacific makes their case for their merger proposal:
https://futureforfreight.com/
Out of curiousity, have CNR or CPR mentioned proceeding with the extension to Alice Texas in any of their STB filings?
Mike Haverty made it out like the Rosenberg - Victoria shortcut would be such a financial win for KCS that the logical next step would be to acquire and rebuild the Victoria to Alice segment. But then the talk went silent.
I'm curious if the deeper wallet of both suitors might make that plan a reality and enable them to avoid ~100 miles of UP trackage rights.
SD60MAC9500 MidlandMike While there is certainly competition between rail and truck, nevertheless, much of what goes by truck is not competitive by rail, and in fact rail has shed most short and intermediate hauls. Rail's competition is really other railroads. Say what?
MidlandMike While there is certainly competition between rail and truck, nevertheless, much of what goes by truck is not competitive by rail, and in fact rail has shed most short and intermediate hauls. Rail's competition is really other railroads.
While there is certainly competition between rail and truck, nevertheless, much of what goes by truck is not competitive by rail, and in fact rail has shed most short and intermediate hauls. Rail's competition is really other railroads.
Say what?
Your map shows the only rail dominated market is the coal going east from Powder River Basin. Trucks dominate all other land routes with the exception of overlap on the Southern and Central corridors, and there they only give the aggragate summary. The only waterway shown is the Ohio/Lower Mississippi. Your map seems to reaffirm the compartimentalization of different types of freight into different modes.
beaulieu SD60MAC9500 Any mileage advantage CP would have from Western Canada is minuscule. If it even has one. Not only that CP will have a much harder operating profile compared to CN which can run down the relatively flat and much less circuitous Illinois Central. Just because a railroad has less milage compared to a competitor doesn't mean it has the best route or the lowest grade route...Also CN does avoid Chicago. It's called The J.. Shreveport to Winnipeg via CN routed through Jackson, MS is 1807 miles based on CN and KCS ETT Shreveport to Winnipeg via CP routed through Kansas City is 1554 miles based on CP and KCS ETT That's 253 miles which is not miniscule. That's at least one additional crew district if you can space them out to best advantage. That is calculated using IC's Edgewood cutoff to minimize CN's distance. Southbound grades on CP and KCS are about 1.3% from Ottumwa and over Rich Mountain. for CN and KCS it's 1.3% over Byron Hill south of Fond du Lac, WI and a bit over 1% over Anding Hill, south of Yazoo City, MS. Toughest grades are northbound via either route, for CP it's Rutledge Hill out of Ottumwa, IA at 1.7%, and for CN it is Steelton Hill out of Superior, WI at 2.2%.
SD60MAC9500 Any mileage advantage CP would have from Western Canada is minuscule. If it even has one. Not only that CP will have a much harder operating profile compared to CN which can run down the relatively flat and much less circuitous Illinois Central. Just because a railroad has less milage compared to a competitor doesn't mean it has the best route or the lowest grade route...Also CN does avoid Chicago. It's called The J..
Any mileage advantage CP would have from Western Canada is minuscule. If it even has one. Not only that CP will have a much harder operating profile compared to CN which can run down the relatively flat and much less circuitous Illinois Central. Just because a railroad has less milage compared to a competitor doesn't mean it has the best route or the lowest grade route...Also CN does avoid Chicago. It's called The J..
Shreveport to Winnipeg via CN routed through Jackson, MS is 1807 miles based on CN and KCS ETT
Shreveport to Winnipeg via CP routed through Kansas City is 1554 miles based on CP and KCS ETT
That's 253 miles which is not miniscule. That's at least one additional crew district if you can space them out to best advantage. That is calculated using IC's Edgewood cutoff to minimize CN's distance. Southbound grades on CP and KCS are about 1.3% from Ottumwa and over Rich Mountain. for CN and KCS it's 1.3% over Byron Hill south of Fond du Lac, WI and a bit over 1% over Anding Hill, south of Yazoo City, MS.
Toughest grades are northbound via either route, for CP it's Rutledge Hill out of Ottumwa, IA at 1.7%, and for CN it is Steelton Hill out of Superior, WI at 2.2%.
Thank you for the mileage correction. However Rich Mountian southbound is almost 1.5%. Yet before the Quachita Mountains KCS has to cross the Boston Mountains. Neosho begin of 1.5%, After Noel 1.5%, and again at Gentry. Along with two more grades in excess of 1.1%..
Northbound through the Boston Mountains. 1.5% at Watts, followed by two hills in excess of 1.1%, with 1.5% coming out of the Elk River Valley. CN still has the better operating profile north and south.
kgbw49 MidlandMike, interesting point. Any thoughts about the Mexican Goverment stepping in to regain control of the KCS de Mexico franchise?
MidlandMike, interesting point. Any thoughts about the Mexican Goverment stepping in to regain control of the KCS de Mexico franchise?
Mexico nationalized its oil production just before WWII, although I think something like that is less likely post-NAFTA. Not sure if the lease agreement has some claw-back provision.
Juniata Man Keep in mind that KCSM holds a lease of sorts from the Mexican government - not ownership. The STB really has no authority to dictate what happens with KCSM. I also harbor doubts that CN ownership of KCS would be anti-competitive in terms of cross border traffic. I've read in recent months that KCS handles only about a third or so of traffic crossing at Laredo with UP handling the rest. Now, UP ownership of KCS would be anti-competitive were that under consideration. CW
Keep in mind that KCSM holds a lease of sorts from the Mexican government - not ownership. The STB really has no authority to dictate what happens with KCSM.
I also harbor doubts that CN ownership of KCS would be anti-competitive in terms of cross border traffic. I've read in recent months that KCS handles only about a third or so of traffic crossing at Laredo with UP handling the rest. Now, UP ownership of KCS would be anti-competitive were that under consideration.
STB does not regulate KCSdM, but they do regulate US RR companies and could still make a spin-off a condition of merger.
UP gets the lions share of KCSdM export traffic because they serve many more destinations. CN also serves many destinations, and as a single line service would probably grab much of that traffic from UP, and all of the traffic that formerly went to CP at KC.
SD60MAC9500 Ulrich Both the STB and the Biden Administration have come out in favor of more competition, not less. CN and CP will therefore have to show how any merger with KCS would enhance competition.. There's plenty competiton. I don't believe our government understands the modal competition that exist between road and rail.. The lane that stands to benefit most from this merger is the NAFTA corridor. CN is the preferred merger partner in my eyes. A better route requiring less circuitry, assets and the least amount of trackage rights.. The I-69 corridor is currently dominated by truck competition. Better rail access in this lane would be competition.
Ulrich Both the STB and the Biden Administration have come out in favor of more competition, not less. CN and CP will therefore have to show how any merger with KCS would enhance competition..
Both the STB and the Biden Administration have come out in favor of more competition, not less. CN and CP will therefore have to show how any merger with KCS would enhance competition..
There's plenty competiton. I don't believe our government understands the modal competition that exist between road and rail.. The lane that stands to benefit most from this merger is the NAFTA corridor. CN is the preferred merger partner in my eyes. A better route requiring less circuitry, assets and the least amount of trackage rights.. The I-69 corridor is currently dominated by truck competition. Better rail access in this lane would be competition.
KCS's lease of the Mexico lines was not that big of a deal, as KCS has a small footprint in the US. A lot of the business off KCS/Mexico goes to UP. However, the class I with a large service area who gets KCS will will be a big deal. CN is only interested in the Mexico connection, and will eliminate KCS other than what they need to connect to the border (as the do with any acquired duplicate lines). I think in any merger, KCS de Mexico should be spun-off, perhaps as a joint terminal company open to any RR that wants to buy a percentage from KCS. Any deal that seeks to grab KCS de Mexico for exclusive use is non-competitive.
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