$25-bln railroad merger to link all North America

Canadian Pacific has agreed to acquire Kansas City Southern in a $25-billion deal that will create a trans-North American railroad operator.

The Wall Street Journal’s Jacquie McNish reported:

Canadian Pacific CP -1.37% Railway Ltd. agreed to acquire Kansas City Southern KSU 0.38% in a transaction valued at about $25 billion that would create the first freight-rail network linking Mexico, the U.S. and Canada.

The combination, which faces a lengthy regulatory review, is a long-term wager on an interconnected North American economy. The three countries are reopening at different speeds after the Covid-19 pandemic disrupted supply chains and upended global trade. Rail volumes, which plunged last year, have rebounded though backlogs at California ports have delayed imports from Asia and stalled some U.S. factories.

Reuters’ Nandakumar D, Ann Maria Shibu, and Rebecca Spalding wrote:

It would be the largest ever combination of North American railways by transaction value. It comes amid a recovery in supply chains that were disrupted by the COVID-19 pandemic, and follows the ratification of the US-Mexico-Canada Agreement (USMCA) last year that removed the threat of trade tensions that had escalated under former U.S. President Donald Trump.

CNN’s David Goldman noted:

The companies said in a statement that the deal would help them become more competitive. That could become increasingly important as the USMCA — the revised NAFTA trade deal between the United States, Canada and Mexico — takes hold. The combined company would operate 20,000 miles of rail, employing nearly 20,000 people and generating annual sales of about $8.7 billion.