Canadian Pacific Kansas City

Predecessors and formation

Canadian Pacific Railway (CP) announced on March 21, 2021, that it was planning to purchase Kansas City Southern (KCS) for US$29 billion.

Thirty days later, Canadian National Railway (CN) issued a competing offer of $33.7 billion. But in August, the US Surface Transportation Board (STB) blocked the CN deal, ruling that the company could not use a voting trust to assume control of KCS because it might reduce competition in the railroad industry.

On September 12, 2021, KCS accepted a new $31 billion offer from CP and terminated its agreement with CN. KCS's shareholders voted to approve the merger on December 10, 2021. The STB had already ruled that CP's plan to use a voting trust to take control of KCS would not hamper competition. The voting trust allowed CP to become the beneficial owner of KCS in December 2021, but the two railroads operated independently until receiving approval for a merger of operations from the STB. CP President and CEO Keith Creel, who became CEO of the merged company, chose the name of the new company as a way to honor the long and rich history of the two main predecessor companies. Creel also announced that if the STB approved the merger of CP with KCS, it would be celebrated with a historic tour from Calgary to Mexico City led by the iconic steam locomotive CPR #2816, The Empress.

Union Pacific and BNSF Railway raised objections with the STB about the merger. Both companies were concerned about CPKC's projected traffic increases and warned that they could cause congestion on UP-owned tracks through the Houston area (Houston, West Belt, East Belt, Beaumont, Harrisburg and Glidden Subdivisions), where UP and BNSF operate a large amount of daily traffic. (BNSF operates in the Houston area through a combination of owned tracks and trackage and haulage rights on UP tracks.) CPKC relies on UP trackage rights between Beaumont and Rosenberg, and between Victoria and Robstown to move its trains from Beaumont to the Mexican border at Laredo; that includes crossing Houston, where KCS and CPKC trains have experienced significant delays due to the heavy traffic that UP and BNSF operate in the Terminal. Creel, who has maintained important working relationships with UP, stated that he would spend time in Houston to learn about operations throughout the area and collaborate with UP to come up with a solution to the recurring problem of traffic congestion.

At the STB hearings, CP and KCS defended their merger proposal, arguing that Houston has sufficient capacity to support the projected increases in traffic. Creel, for example, argued that the receiving and departure tracks located at the west end of Englewood Yard, UP's main yard in Houston, could be lengthened to accommodate longer trains. UP responded to CP's arguments, saying that although they have a proposal to expand the yard, they could not proceed until existing environmental issues were resolved, stemming from creosote contamination that has affected the area surrounding Englewood (Southern Pacific for decades operated a facility at Englewood to treat railroad ties with creosote, and accidental spills of this substance caused severe contamination of the soil beneath the neighborhoods around the yard; UP is currently working with the City of Houston and the Environmental Protection Agency (EPA) on a remediation plan for the existing contamination in the area.) To mediate between the disputing parties, the Board suggested that (pending merger approval or post-merger) KCS or CPKC might apply to UP for trackage rights from Texarkana to Laredo via San Antonio and Austin to reroute part of the north-south traffic, bypassing Houston.