Maritime port rivalry surfaces in corporate battle for U.S. railway
Halifax and Saint John backed rival bidders in the $30B battle for Kansas City Southern railway
Canadian National said Wednesday it is confident it will win U.S. regulatory approval for its $33-billion purchase of the Kansas City Southern railway, a deal that has implications for two Maritime provinces with rival gateway ports.
If approved, CN will own a single, north-south rail network connecting Canada, the United States and Mexico — positioning itself as a carrier for free trade in everything from lumber to cars between the three countries.
Business and political interests in the ports of Halifax and Saint John want to be part of that network.
Halifax's port authority, which backed CN's winning bid against Canadian Pacific Railway, said the deal offers the prospect of more business.
"Any growth in the CN network is a growth opportunity for the Port of Halifax," Capt. Allan Gray, CEO of the port authority, said Wednesday. "We're reaching deeper into the U.S. market. So this is a whole new market space for the Port of Halifax."
Saint John backed competing railway
Calgary-based CP had an agreement earlier this spring to purchase the American railway for $29 billion, only to lose it when CN came in with a sweeter offer.
The competition exposed rivalry between neighbouring Maritime provinces Nova Scotia and New Brunswick.
CP has been beefing up its presence in the Port of Saint John and promoting the city as its East Coast gateway. Prominent backers of CP's bid included JD Irving Ltd. and New Brunswick Premier Blaine Higgs, who expressed his "enthusiastic support" in a letter to U.S. regulators urging them to reject CN's request.
Nova Scotia Premier Iain Rankin sent a letter supporting the CN purchase, as did Irving Oil.
"Strengthened logistical connections resulting from CN's proposed acquisition of KCS [Kansas City Southern] are critical to our future growth and success," Rankin wrote on May 12.
More opportunity for ports like Halifax
On Wednesday, CN and Kansas City Southern filed a 369-page motion with the U.S. Surface Transportation Board seeking approval for the purchase.
"Spreading cargo to uncongested ports allows all importers to have options when dealing with congestion that may arise at larger ports," the railways told regulators in their filing.
The companies said the single line, dubbed Connected Continent, would enhance trade, result in better service, more shipping options and streamlined routing.
"We'd like to see more traffic flowing over these gateways," CN CEO Jean-Jacques Ruest said Wednesday during a joint address with Kansas City Southern CEO Pat Ottensmeyer.
Neither Saint John nor Halifax were mentioned by name during the conference. However, the plan offers hope to Halifax, which is operating under capacity and sells easy access and speedy turnaround times for shippers.
Needs U.S. approval
To address competition concerns, CN has pledged to sell a 100-kilometre stretch of the Kansas City Southern line between New Orleans and Baton Rouge, La.
It's the only section of overlap between the two railways.
CP president Keith Creel said the railway is ready to "re-engage" if regulators reject the deal between CN and Kansas City Southern.
"We believed then and we believe now our proposal between CP and KCS is a perfect marriage between two rail networks," Creel said.
The company declined an opportunity to top CN's bid.
Ruest said he expects a decision in June with the deal closing in 2022.