Shippers pick sides in rail bid

Canadian Pacific Railway Ltd. and Canadian National Railway are preparing to fight to buy Kansas City Southern.| Reuters/Edgard Garrido photo

WINNIPEG (Reuters) — North America’s freight rail customers, from grain shippers to logistics companies, are choosing sides as Canadian Pacific Railway Ltd. and Canadian National Railway fight to buy Kansas City Southern.

A takeout of KCS would be the first major North American railroad combination in more than 20 years and would 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 April 20, topping CP’s agreed $25 billion bid, but CP has said it is not considering raising its offer.

CN said April 26 that it was filing 409 letters of support from shippers and suppliers with the regulator, the U.S. Surface Transportation Board (STB), pulling roughly even with CP’s stated level of support.

CP, which announced its combination with KCS on March 21, has said that 416 shippers and other stakeholders have written to STB in support. CP supporters include shipping container company Hapag-Lloyd, agriculture company Viterra, an association representing Mexican auto makers, and oil refiner Valero Energy Corp.

If CP buys KCS, the bulked-up company will be better able to compete in North Dakota 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.

CN maintains that its combination with KCS would create a network that is shorter and faster than rail or truck competitors. Its supporters include pork producer Maple Leaf Foods and steel manufacturer ArcelorMittal.

Some, like Coca-Cola, marine terminal operator DP World, Canadian grain handler Richardson International and U.S. food company Conagra are publicly supporting both rail bids.

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