Canada’s Class I railroads have joined BNSF Railway in calling out the Union Pacific-Norfolk Southern mega-merger as a negative for the industry.
While Canadian Pacific Kansas City (CPKC) had already publicly rejected the idea of rail consolidation in the weeks after the merger announcement, both the railroad and top rival Canadian National (CN) recently launched websites where they highlight their concerns with the $85 billion takeover.
CPKC said on its site that the impending UP-NS merger is “not in the public interest,” “unnecessary,” and would “dominate rail transportation markets, reducing rail customer optionality in ways that cannot be undone.”
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And like BNSF, CN is calling on shippers to speak out against the deal, imploring them to share commentary on the transaction with the Surface Transportation Board (STB), which still has to approve the merger.
“The industry does not need a merger to provide better service to the North American economy,” said CN president and CEO Tracy Robinson in a Friday earnings call. “What we need is more cooperation and less regulation. No level of mitigation can offset the reduction of options and the increased cost of service to customers.”
Cooperations has been stressed as a better alternative to the transcontinental railroad proposed by Union Pacific and Norfolk Southern, with CPKC saying on its website that collaboration among railroads in high-density east-west traffic lanes “can achieve the kinds of benefits UP and NS say they are pursuing by merging.”
Union Pacific and Norfolk Southern expect to file their joint merger application with the STB by the start of the December at the latest, according to the acquiring railroad’s CEO Jim Vena.
In an Oct. 20 regulatory filing, the merging railroads asked the STB to shave 45 days off the review process. The regulator’s operations are currently suspended due to the government shutdown.
The STB has not yet set the deadline for shippers to file a notice, but it is typically due 45 days after railroads would submit their merger application.
The board’s review is expected to take 17 to 22 months.
In a Wednesday earnings call, CPKC CEO Keith Creel urged the STB to take ample time to review the application and respond.
“There’s no way in the world for this to have a thorough review that it occurs in less than 16 to 17 months,” said Creel. “I know there’s an echo chamber. I read it. I hear it. I sense it. I know there’s a lot of invested investors that perhaps want this to be a layup. This is not a layup, number one. It’s not a foregone conclusion that’s going to get approved. What we do know is the hurdle is going to be high. These are rules that have never been tested.”
Creel, who was CEO and president of Canadian Pacific during its two-year long approval process to acquire Kansas City Southern in April 2023, said he didn’t think the merger will meet the STB’s standards for meeting the public interest and enhancing railroad competition.
At the time, the STB ended up approving that $31 billion takeover largely due to the small size of KCS, with the merging companies remaining the smallest of the Class I North American railroads. CPKC also had the fewest overlapping routes compared to if KCS merged with another Class I railroad.
“You’ve got overlap in key markets. You’ve got customers going to have fewer options,” Creel said. “I don’t say you’re enhancing competition if you reduce options.”
Both Creel and Robinson were adamant in their respective earnings calls that they would leverage more opportunities to achieve merger-like benefits via partnerships in the event the merger—which has had backing from President Donald Trump—gets approval.
“If it happens, we will be very aggressive in making sure that we not only protect our network, but that we position it so that we can drive some of what we’re sitting on up here deeper into the markets in the United States and south as those opportunities present themselves,” CN’s Robinson said in the call.
CN recently teamed with CSX to develop an intermodal service line between Nashville and Vancouver.
“We’re pretty optimistic as we look out over the longer term that we’re positioned with flexibility to respond to whatever happens from an M&A perspective and a global trade flow perspective.”
And as rumors were floating about the possible UP-NS merger in July, CPKC unveiled its own partnership with CSX that had been ongoing since last December. The Class Is jointly launched the Southeast Mexico Express (SMX), an east-west corridor that connects shippers in Mexico, Texas and the U.S. southeast and leverages both companies railroad networks.
