CHICAGO — Archer Daniels Midland Co. (ADM) is supporting Canadian National’s (CN) requested divestiture of Kansas City Southern’s (KCS) rail line branching from Kansas City, Mo., to Springfield, Mo., and East St. Louis, Ill., as part of the proposed KCS merger with Canadian Pacific.
In a letter submitted July 11 to the Surface Transportation Board, Christopher L. Boerm, president of ADM Transportation, said the company supports CN’s divestiture proposal that would create a single-line CN service to and from Kansas City that would directly compete with the service provided by CP-KCS, should the merger be approved.
“While new service will be available, no options will be lost, as KCS will retain access to the divested lines via haulage agreement with CN,” Boerm said. “This new competitive option will be particularly beneficial to agricultural customers and producers across the Midwest.”
CP agreed in September 2021 to acquire KCS in a stock and cash transaction valued at about $31 billion. The merged company would operate about 20,000 miles of rail. The STB announced it had accepted the merger application for consideration in November 2021. If approved by the STB, the transaction would create Canadian Pacific Kansas City Ltd. (CPKC), the only single-line railroad linking the United States, Mexico and Canada.
CN had come up short in its own bid to acquire KCS when the STB on Aug. 31, 2021, unanimously rejected the use of a voting trust agreement in connection with the proposed transaction.
In January 2022, CN officially asked the STB “to condition any approval of a Canadian Pacific-Kansas City Southern merger on the divestiture of the KCS line from Kansas City, Mo., to Springfield and East St. Louis, Ill. (the Kansas City Speedway), to CN, pursuant to the STB’s statutory authority to order ‘the divestiture of parallel tracks’ as a merger condition.”
In its letter, ADM noted that if the divestiture condition is granted, CN has committed to invest $250 million in the line over three years to improve transit times, infrastructure and service. ADM processing and grain handling assets directly affected by the divestiture of the KCS line would include Decatur and Cockrell, Ill.; and Mexico, Mo. In addition, ADM conducts business with multiple customers along affected rail lines.
“CN’s request that the Surface Transportation Board grant their divestiture conditions aligns with the customer-focused approach to business that CN has demonstrated since the inception of our relationship,” Boerm said. “We hope the STB also will realize the customer-focused public interest benefits of CN’s divestiture condition and will work closely with ADM, CN and all relevant parties to promote regional competition and customer choice.”
Final briefs from interested parties in the case are due on Sept. 20, 2022. CP has said it anticipates a decision by the STB on the proposed merger in the first quarter of 2023.
Read more about supply chain topics affecting the industry on our Operations page.