US regulator approves US$25bn CP-KCSM deal

US authorities approved the US$25bn acquisition of Kansas City Southern (KCS) by Canadian Pacific (CP), paving the way for the first Mexico-US-Canada rail link.

The deal was announced some two years ago. 

With the approval by the Surface Transportation Board (STB), CP will take control of KCS’ infrastructure, including its KCSM subsidiary in Mexico, on April 13, KCS said in a statement. The new company will be called CPKC. 

Although STB received the request for approval in October 2021, competition concerns in the US market led the regulator to further analyze the deal. 

STB approved the merger under certain conditions that include “an unprecedented seven-year oversight period and contains many conditions designed to mitigate environmental impacts, preserve competition, protect railroad workers, and promote efficient passenger rail.”

The regulator “also anticipates the merger will result in improvements in safety and the reduction of carbon emissions,” adding that “the transaction is end-to-end, meaning there are little to no track redundancies or overlapping routes between the railroads; they connect only in Kansas City.”

KCSM president Oscar del Cueto said in January that he met with Mexico’s infrastructure, communications and transportation minister Jorge Nuño Lara to promote the deal. Also present were KCS CEO Pat Ottesmeyer and operations executive VP John Orr.

The acquisition will not harm the infrastructure portfolio of the Kansas operator in Mexico and could even lead to bigger investment opportunities for the country, KCSM infrastructure director José Manuel Fragoso told an event in October.