Canadian Pacific and Kansas City Southern to
combine April 14 to create CPKC,
the first and only single-line railway connecting the U.S.,
Mexico and Canada
CALGARY,
AB, March 17, 2023 /PRNewswire/ - Canadian
Pacific (TSX: CP) (NYSE: CP) ("CP") said today that, on
April 14, 2023, it will exercise the
authority granted by the U.S. Surface Transportation Board's
("STB") March 15 final decision and
combine with Kansas City Southern ("KCS") to create Canadian
Pacific Kansas City, the first and only single-line railway
connecting the U.S., Mexico and
Canada. CP today also announced
the executive leadership team that will lead CPKC.
"Our new combined railroad will create a truly unique
single-line network connecting three nations and instantly
injecting new competition into the North American rail industry
when our supply chains have never needed it more," said
Keith Creel, CP President and CEO.
"The public, environmental, competitive and safety benefits of this
historic combination, clearly recognized by the U.S. Surface
Transportation Board, are extraordinary for our employees,
communities, rail customers and the North American economy.
"Under the leadership of the exceptional group of railroaders we
announce today, CPKC will bring new options to rail
customers while increasing safety, improving service and
spurring new investment in our railroad network," Mr. Creel added.
"Together, all these benefits will create jobs and drive economic
growth in North America.
"We acknowledge the thorough and thoughtful consideration put
into the STB's final decision, including the conditions it imposes
in order to assure that the transaction's public benefits are
realized and any potential harms are avoided. We intend to
participate cooperatively and proactively to assist the STB during
its oversight process and will honor the conditions the STB has
imposed," Mr. Creel said.
As previously announced, Mr. Creel will become President and CEO
of CPKC. The following are the anticipated future senior leaders of
CPKC, subject to formal appointment by the board of directors, with
the executives listed below reporting to the president and CEO:
- Nadeem Velani, Executive
Vice-President and Chief Financial Officer
- John Brooks, Executive
Vice-President and Chief Marketing Officer
- Mark Redd, Executive Vice-President and Chief Operating
Officer
- John Orr, Executive
Vice-President and Chief Transformation Officer
- James Clements, Executive
Vice-President Strategic Planning & Technology
- Jeff Ellis, Executive Vice-President Chief Legal
Officer and Corporate Secretary
- Warren Erdman, Executive Advisor
Strategic Projects
- Laird Pitz, Senior Vice-President and Chief Risk Officer
- Mike Foran, Senior
Vice-President Network & Capacity Management
- Chad Rolstad, Vice-President of
Human Resources and Chief Culture Officer
- Oscar Augusto Del Cueto Cuevas,
KCSM President, General Manager and Executive
Representative
Pat Ottensmeyer, KCS President
and CEO, has agreed to continue to be an advisor to Mr. Creel
through the remainder of 2023 to ensure continuity on key
initiatives predominantly involving the combined company and
Mexico.
"Our senior leadership team is eager to come together to write
the next chapter of railroad history in North America," said Mr. Creel. "This
experienced team will guide our work on a seamless integration for
our customers, our employees and the North American supply
chain."
CP completed its US$31 billion
acquisition of KCS on Dec. 14, 2021.
Immediately upon the closing of that acquisition, shares of KCS
were placed into a voting trust which has ensured that KCS operates
independently of CP during the regulatory review process. Until CP
exercises control pursuant to the STB decision of March 15 and the Voting Trust is dissolved, CP
and KCS will continue to operate independently.
Headquartered in Calgary,
Alta., Canada, CPKC will be
the first railway connecting North
America. While remaining the smallest of six U.S. Class 1
railroads by revenue, the combined company will have a much larger
and more competitive network, operating approximately 20,000 miles
of rail, employing close to 20,000 people. Full integration of CP
and KCS is expected to happen over the next three years, unlocking
the benefits of the combination.
CPKC will bring a new standard of safety to the North American
rail landscape. CP has been the safest railroad in North America for 17 straight years as
measured by the Federal Railroad Administration train accident
frequency ratio. In 2022, CP had an all-time best frequency of
0.93, a rate nearly half what the company produced a decade ago and
69 percent lower than the Class 1 average.
CP's culture of safety, supported by its history of sustained
investments in core infrastructure and technology, aligns with
KCS's likeminded culture, allowing the combined system to operate
at the apex of rail safety. CPKC will implement the combination
with safety at the forefront of everything it does. In its decision
approving the combination, the STB said CPKC "should ultimately
enhance safety and benefit the environment."
The STB decision also highlighted a number of other anticipated
benefits:
- "The Board expects that this new single-line service will
foster the growth of rail traffic, shifting approximately 64,000
truckloads annually from North
America's roads to rail, and will support investment in
infrastructure, service quality, and safety."
- "Indeed, approval of this transaction may even enhance safety
for the nation as a whole" and that "thus, any rail traffic
diverted to CPKC from other railroads will likely mean traffic
moving to a railroad with a better safety record."
- "The transaction is also expected to drive employment growth
across the CPKC system, adding over 800 new union-represented
operating positions in the United
States."
- "The transaction will make possible improved single-line
service for many shippers and will result in merger synergies that
are likely to allow CPKC to be a vigorous competitor to other Class
1s by providing improved service at lower cost."
CPKC plans capital investments in new infrastructure of more
than US$275 million over the
next three years to improve rail safety and capacity of the core
north-south CPKC main line between Louisiana and the Upper Midwest.
Anticipated environmental benefits of CPKC include the avoidance
of more than 1.6 million tons of greenhouse gas (GHG) emissions due
to the anticipated improved operational efficiency of CPKC versus
current operations and another 300,000 tons of GHG emissions with
the diversion of 64,000 trucks to rail for a total reduction of 1.9
million tons of GHG emissions over the next five years. By
diverting 64,000 long-haul truck shipments to rail annually with
new CPKC intermodal services, reducing total truck vehicle miles
traveled by almost 2 billion miles over the next two decades,
saving US$750 million in highway
maintenance costs.
CPKC will also support the expansion of Amtrak and other
passenger services on the CPKC network.
Forward looking information
This news release contains certain forward looking statements and
forward looking information (collectively, "FLI") to provide CP
shareholders and potential investors with information about CP, KCS
and their respective subsidiaries and affiliates, which FLI may not
be appropriate for other purposes. FLI is typically identified by
words such as "anticipate", "expect", "project", "estimate",
"forecast", "plan", "intend", "will", "target", "believe", "likely"
and similar words suggesting future outcomes or statements
regarding an outlook. All statements other than statements of
historical fact may be FLI.
Although we believe that FLI is reasonable based on the
information available today and processes used to prepare it, such
statements are not guarantees of future performance and you are
cautioned against placing undue reliance on FLI. By its nature, FLI
involves a variety of assumptions, which are based upon factors
that may be difficult to predict and that may involve known and
unknown risks and uncertainties and other factors which may cause
actual results, levels of activity and achievements to differ
materially from those expressed or implied by FLI, including, but
not limited to, the following: the realization of anticipated
benefits and synergies of the CP-KCS transaction and the timing
thereof; the success of integration plans; the focus of management
time and attention on CP-KCS integration; changes in business
strategy and strategic opportunities; estimated future dividends;
financial strength and flexibility; debt and equity market
conditions, including the ability to access capital markets on
favourable terms or at all; cost of debt and equity capital; the
ability of management of CP, its subsidiaries and affiliates to
execute key priorities, including those in connection with the
CP-KCS transaction; general Canadian, U.S., Mexican and global
social, economic, political, credit and business conditions; risks
associated with agricultural production such as weather conditions
and insect populations; the availability and price of energy
commodities; the effects of competition and pricing pressures,
including competition from other rail carriers, trucking companies
and maritime shippers in Canada,
the U.S. and Mexico; North
American and global economic growth; industry capacity; shifts in
market demand; changes in commodity prices and commodity demand;
uncertainty surrounding timing and volumes of commodities being
shipped; inflation; geopolitical instability; changes in laws,
regulations and government policies, including regulation of rates;
changes in taxes and tax rates; potential increases in maintenance
and operating costs; changes in fuel prices; disruption in fuel
supplies; uncertainties of investigations, proceedings or other
types of claims and litigation; compliance with environmental
regulations; labour disputes; changes in labour costs and labour
difficulties; risks and liabilities arising from derailments;
transportation of dangerous goods; timing of completion of capital
and maintenance projects; sufficiency of budgeted capital
expenditures in carrying out business plans; services and
infrastructure; the satisfaction by third parties of their
obligations; currency and interest rate fluctuations; exchange
rates; effects of changes in market conditions and discount rates
on the financial position of pension plans and investments; trade
restrictions or other changes to international trade arrangements;
the effects of current and future multinational trade agreements on
the level of trade among Canada,
the U.S. and Mexico; climate
change and the market and regulatory responses to climate change;
ability to achieve commitments and aspirations relating to reducing
greenhouse gas emissions and other climate-related objectives;
anticipated in-service dates; success of hedging activities;
operational performance and reliability; customer and other
stakeholder approvals and support; regulatory and legislative
decisions and actions; the adverse impact of any termination or
revocation by the Mexican government of Kansas City Southern de
Mexico, S.A. de C.V.'s Concession;
public opinion; various events that could disrupt operations,
including severe weather events, such as droughts, floods,
avalanches and earthquakes, and cybersecurity attacks, as well as
security threats and governmental response to them, and
technological changes; acts of terrorism, war or other acts of
violence or crime or risk of such activities; insurance coverage
limitations; material adverse changes in economic and industry
conditions, including the availability of short and long-term
financing; and the pandemic created by the outbreak of COVID-19 and
its variants, and resulting effects on economic conditions, the
demand environment for logistics requirements and energy prices,
restrictions imposed by public health authorities or governments,
fiscal and monetary policy responses by governments and financial
institutions, and disruptions to global supply chains.
We caution that the foregoing list of factors is not exhaustive
and is made as of the date hereof. Additional information about
these and other assumptions, risks and uncertainties can be found
in reports and filings by CP with Canadian and U.S. securities
regulators, including any prospectus, material change report,
management information circular or registration statement that have
been or will be filed in connection with the transaction. Reference
should be made to "Risk Factors" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations – Forward
Looking Statements" in CP's annual and interim reports on Form 10-K
and 10-Q. Due to the interdependencies and correlation of these
factors, as well as other factors, the impact of any one
assumption, risk or uncertainty on FLI cannot be determined with
certainty.
Except to the extent required by law, we assume no obligation to
publicly update or revise any FLI, whether as a result of new
information, future events or otherwise. All FLI in this news
release is expressly qualified in its entirety by these cautionary
statements.
About Canadian Pacific
Canadian Pacific (TSX: CP)
(NYSE: CP) is a transcontinental railway in Canada and the
United States with direct links to major ports on the west
and east coasts. CP provides North American customers a competitive
rail service with access to key markets in every corner of the
globe. CP is growing with its customers, offering a suite of
freight transportation services, logistics solutions and supply
chain expertise. Visit www.cpr.ca to see the rail advantages of CP.
CP-IR
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SOURCE Canadian Pacific