While most of the battle between CP and CN is being played out in the U.S., a significant question looms large: What’s in it for Canadian shippers? John Corey, head of the Freight Management Association of Canada shares his opinion of what this merger might mean for Canadian shippers.

Canadian Pacific gives Kansas City Southern deadline on merger deal
Canadian Pacific gives Kansas City Southern deadline on merger deal

In July 2000, the boards of CN and BNSF voted to terminate their proposed merger after a U.S. appeals court upheld a 15-month halt on further developments imposed by the federal Surface Transportation Board. Two decades later, the STB will make a final ruling – though not likely before 2022 – on another significant cross-border acquisition proposal involving Class 1 railways. But this time the North American railway sector has become the arena of an unprecedented, no-holds-barred mano-a-mano between Canada’s two major railways seeking to gobble up Kansas City Southern, thereby creating the first fully-continental network stretching from Canada to Mexico.

In the event this giant consolidation materializes, what are some of the overall implications and potential gains from a Canadian shipper perspective? Some candid insights emerged from an interview with John Corey, who for many years dealt with rail dispute resolution at the Canadian Transportation Agency (CTA) before recently assuming the helm of the Freight Management Association of Canada (FMA), whose member companies purchase an estimated $4 billion in freight services of all modes annually. In responding to questions from AJOT, however, Corey stressed that the FMA was not taking sides in the matter and he was offering “personal opinion.”

John Corey, head of the Freight Management Association of Canada
John Corey, head of the Freight Management Association of Canada

Truth Stranger than Fiction

“They say truth is stranger than fiction and in the case of the rival CP/CN bids for the KCS, that is certainly the case,” he began. “Very high on intrigue, suspense and even entertainment value, but will either deal be good for Canadian shippers? Maybe, maybe not.”

Looking first at the CP offer last March, he noted: “Starting as a friendly offer, the voting trust quickly got approval from the STB, which also affirmed the CP-KCS combination would be evaluated under the pre-2001 STB merger rules – in fact, merger rules light. This merger looked like a good fit, completely end to end. No overlap.

Then CN made a competing offer. Unlike the CP-KCS proposed merger, the CN-KCS combination would be scrutinized under the more stringent STB merger rules adopted in 2001. The STB has not yet approved the CN proposed voting trust. [Editor’s note: The STB subsequently rejected the CN bid on August 31st]

“If the CN-KCS merger is approved it would give CN a commanding position in the Mississippi corridor from Chicago to the Gulf, with the Illinois Central east of the Mississippi and the KCS on the west side.”

So, will…

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