Prototype News

Canadian National has signed an agreement with Union Pacific to drop its opposition to the proposed UP-Norfolk Southern merger in return for overhead rights, access to new customers and ownership stakes in two different terminal railroads. In addition, UP and CN are now swapping trackage rights in a deal that will give UP a new route around Chicago and CN access to markets in Mexico.

The sweeping set of agreements comes as UP continues to push for its acquisition of NS to create the largest railroad in North America, one that will stretch more than 50,000 miles and reach 43 states. The binding Memorandum of Understanding is a win for UP, but it’s particularly lucrative to CN, allowing it to better compete with its Canadian counterpart, CPKC, for traffic going to and from Mexico.

According to the agreement, if the UP-NS merger is approved, the Canadian road will gain access to shipper facilities where Class I railroad operations would be reduced from 2-to-1 or 3-to-2; CN would acquire NS’s ownership stakes in the Kansas City Terminal Railway and the Terminal Railroad Association of St. Louis; and CN will get overhead rights between Tuscola and East St. Louis, Ill., as well as the right to serve customers between St. Louis and Kansas City, Mo., giving the railroad a new foothold in the Midwest. In return for all that, CN will drop its opposition to the merger. In a separate agreement that will have a more immediate impact, CN is getting trackage rights between Memphis, Tenn., and Eagle Pass, Tex., in return for UP getting trackage rights over the former Elgin, Joliet & Eastern, giving it a new route around Chicago.

UP CEO Jim Vena, the man who’s been pushing for the merger, said the agreement with CN proved that a combined UP-NS would be good for competition.

“From day one, we’ve said our merger with Norfolk Southern will preserve and enhance competitive options and create a stronger railroad industry that delivers better service for customers,” Vena said. “This settlement agreement reinforces those commitments by giving expanded access and operating rights to a tough competitor.”

While BNSF and CPKC have vigorously opposed the proposed UP-NS merger, CN had been noticeably reserved in its opposition, mostly encouraging a thorough review of the combination.

“As the rail industry considers significant structural change, it is essential that customers continue to benefit from meaningful competition and choice,” said CN President and CEO Tracy Robinson. “This framework would preserve competitive access to key markets, including Kansas City, while positioning CN to continue providing reliable and efficient options for customers across North America.”

—Justin Franz

The post CN Drops Opposition to UP-NS Merger appeared first on Railfan & Railroad Magazine.