North America's freight rail customers, from grain shippers to logistics companies, are pushing for Canadian Pacific Railway Ltd to win a bidding war for Kansas City Southern over rival Canadian National Railway, eyeing stronger competition and swifter service. A takeout of KCS, would be the first major North American railroad combination in more than 20 years and create the first network to include the United States, Canada and Mexico.
CN, Canada's biggest railroad, made an unsolicited $30 billion bid for KCS on Tuesday, topping CP's agreed $25 billion bid, but CP said last week it was not considering raising its offer. Rail customers' lobbying of the regulator, U.S. Surface Transportation Board (STB), is so far lopsided in favor of CP, which announced its combination with KCS on March 21. CP says that 416 rail shippers have written to STB in support. As of Friday, the STB had posted at least 135 letters regarding CP's bid, many of them supporting it and others urging full scrutiny of any merger with KCS. „The end-to-end CP-KCS transaction will improve service options, with new single-line hauls and broader access to markets across North America,“ said Dean McQueen, vice-president of Merchandising and Transportation at Canadian grain handler Viterra, in a letter that mirrored the language of numerous other letters of support. Germany-based potash producer K+S AG, which has a Saskatchewan mine that CP services, wrote that it supports CP's bid and opposes CN's offer because it would reduce competition. Other CP supporters include marine terminal operator DP World, shipping and container company Hapag-Lloyd, Canadian grain handler Richardson International and oil refiner Valero Energy Corp. CN said in a statement that its combination with KCS would create a network that is shorter and faster than rail or truck competitors. But if CP buys KCS, the bulked-up company will be able to better compete with dominant railway BNSF Railway Co, said Kevin Karel, general manager at The Arthur Companies, which ships corn and other crops by rail. CP's line crosses the agricultural state of North Dakota while CN's does not. „We're really remote here, and so we need access to far more destinations, and that's where this KCS merger really helps North Dakota farmers,“ Karel said in an interview.
SHIPPER VIEWS SEEN KEY