North America - It's always encouraging to see a smaller company expand and do well.
 
That's what Canadian Pacific Railway (CP) is attempting to do with its proposed merger with Kansas City Southern Railway (KCS).
 
CP made the offer to KCS to create the first U.S.-Mexico-Canada network.
 
Such a network would be beneficial to North Dakota producers by providing access to markets to the north and south for commodities.
 
At present, CP has about a 25 percent share of the North Dakota market.
 
Along with ag commodities, it ships oil out of New Town.
 
A merger would help the company grow.
 
CP is one of the smallest Class 1 railroads.
 
The U.S. Surface Transportation Board (STB) gave approval to CP and KCS to proceed with the merger under rules prior to those adopted in 2001.
 
This will allow the merger to be completed in a shorter time frame.
 
The STB also approved the use of a voting trust.
 
If shareholders of both companies agree, CP would acquire KCS and put them in the trust.
 
KCS would continue to operate the railroad until the merger is complete.
 
If the companies merge into one, it would operate approximately 20,000 miles of rail, employ nearly 20,000 workers, and generate total revenue of about US$8.7 billion based on 2020 results.
 
That's all in doubt after Canadian National Railway (CN) made a counter offer for KCS.
 
The CN offer is more lucrative for KCS shareholders.
 
CN also asked the STB to allow it to proceed with the merger under the old rules and create a voting trust.
 
That hasn't been decided yet, with the board taking comments.
 
If CN can't move forward under the old rules, and with a voting trust, it makes its offer less appealing.
 
A merger would take longer under the new merger rules.
 
CP has been gaining support in North Dakota.
 
This week the state's congressional delegation sent a letter to the STB supporting the CP/KCS Merger.
 
Senators John Hoeven. Kevin Cramer, and Rep. Kelly Armstrong, all Republicans, argued in the letter that the merger would provide more markets for North Dakota producers by providing access to Mexico.
 
They also said the merger would give North Dakota a more direct route to southern U.S. markets.
 
If CP can pull off the merger with KCS, it will be beneficial for North Dakota.
 
Canada and Mexico are key markets for the state, and having one railroad serving both nations will provide easier access to them.
 
The CN offer will be difficult to beat.
 
CN offered more and CP didn't up its offer.
 
How much clout North Dakota's support for CP will have remains to be seen.
 
Author unknown.