News

Soybean Transportation Coalition comments on railroad bidding war

The Soybean Transportation Coalition is closely watching a bidding war between Canada’s two major railroads as they attempt to purchase the Kansas City Southern railroad.

Canadian Pacific Railroad had announced a 25-billion-dollar deal to acquire the Kansas City Southern in March and competitor Canadian National has now filed an unsolicited 30-billion-dollar bid to acquire the U.S. railroad, which has strong north-south connections from the heartland deep into Mexico.

Mike Steenhoek with the Soy Transportation Coalition says agriculture has witnessed several mergers and consolidations over the years. “Unfortunately, they have often resulted in a decrease in service or an increase in freight rates, and so, certainly, that’s something that we remember whenever there is a proposed merger and acquisition.”

Steenhoek tells Brownfield the Kansas City Southern is highly coveted because of their extensive work developing rail connections into Mexico.  He says Canadian Pacific already has several agricultural customers in the Dakotas that benefit from access to the coasts, and access to Mexico is why several ag interests have endorsed the CP package. “For soybeans, the Mexican market is very important. After China, it’s the number two destination for soybeans. It’s our number one destination for soybean meal, so it’s clearly a very important market.”

Steenhoek says he is waiting to judge which proposal is better for his members, but the offers will get a lot of scrutiny from the Surface Transportation Board. “In mergers and acquisitions, and consolidations, the alarm bells tend to go off more when you’ve got the combining companies with a higher percentage of the market. That certainly would be the case if Canadian National acquired Kansas City Southern.”

Steenhoek says with the review process and now the bidding war, he doesn’t expect to see a final approval of any Kansas City Southern deal until well into next year.

Canadian National issued a statement saying the combination of CN and Kansas City Southern (KCS) will create the premier railway for the 21st century, connecting ports in the United States, Mexico and Canada to expand North American trade and power economic prosperity. CN also says it is ideally positioned to combine with KCS to connect the continent and realize the full benefits of the new North American trade agreement for customers, communities, and the local and national economies it serves and supports.

Canadian Pacific has written to the Surface Transportation Board asking to allow its bid to continue.  Canadian Pacific is reportedly expected to raise its offer, as well.