Mexico, Canada,US Connected by Rail for the First Time in History

Canadian Pacific Railway (CP) announced last Sunday that it has agreed to purchase Kansas City Southern (KCS) for US$25 billion to build the first rail network connecting Canada, US and Mexico. “USMCA ensures 16 years of certainty for private companies to make the investment necessary to develop stronger supply chains in North America. The region’s long-term prosperity and economic recovery depends on a strong reciprocal relationship,” Pat Ottensmeyer, KCS President and CEO, told Railway Age. Keith Creel, President and CEO of CP, will lead the new corporation and is expected to do so until 2026, at least. The new organization will be called Canadian Pacific Kansas City (CPKC) and will have approximately 20,000 employees with annual revenues of US$8.7 billion. As part of the deal, CP will issue 44.5 million new shares, which will be funded with available cash and about US$8.6 billion in debt.

Both companies also highlighted the environmental benefits of the deal, stating that the new routes are expected to displace trucks from crowded US highways and reduce emissions, Progressive Railroading reports. Rail is four times more fuel efficient than trucking and this project can cut greenhouse gas emissions by 75 percent, the companies said in a joint statement.

The new, modernized trade agreement between the US, Mexico and Canada was enforced in July of last year, replacing the previous agreement, which lasted 26 years. The objective of its renewal was to further boost manufacturing and agricultural trade activities between the three countries. As noted in a previous MBN article, trade between Mexico and the US is expected to increase, as the two North American nations enjoy greatly improved relations following the inauguration of President Joe Biden.

Several sectors, including automotive and agribusiness, will benefit from CP and KCS’ venture, which will also boost rail competition. KCS’ acquisition is the largest commercial transaction in decades in the rail industry and will create a “compelling rail network between the US, Mexico and Canada,” according to CBNC.