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A Canadian Pacific Railway crew works on their train at the CP Rail yards in Calgary.

Todd Korol/Reuters

Canadian Pacific Railway Ltd. chief executive officer Keith Creel is wasting no time touting the benefits of the company’s planned Mexican expansion.

A day after Kansas City Southern’s board agreed to CP’s US$27.2-billion takeover offer, Mr. Creel took to a conference call and described KCS’s rail link to Mexico’s port of Lazaro Cardenas as part of a three-coast strategy that includes Vancouver and Saint John.

The deep-water port southwest of Mexico City offers shippers of consumer goods, commodities and automotive products Pacific Ocean access that is free of the congestion that marks most West Coast terminals, leaders of both railways said.

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The rail executives were in Kansas City, Mo., selling the benefits of CP’s proposed takeover of KCS. The deal requires approval of shareholders of each company in votes expected by the end of 2021. The U.S. Surface Transportation Board’s review of the takeover is expected to last until late 2022, while the Mexican antitrust review could last two to four months, Mr. Creel said.

Kansas City Southern formally scraps CN takeover agreement, backs rival CP offer

KCS’s board on Monday said it reached the deal with CP, terminating a takeover agreement with Canadian National Railway Co. and ending a seven-month see-saw battle for the Missouri-based railway.

The combined companies would be called CPKC, employ about 20,000 people and operate a 32,000-kilometre network that runs across Canada, through the United States and deep into Mexico.

By offering customers access to new markets, CP will see more than US$820-million in profit growth over three years while reducing costs by US$180-million, CP said.

The two rail networks meet in Kansas City, and do not overlap. This feature will help the deal pass regulatory approval while offering customers a single-line route that lacks the costly and time-consuming interchanges with other carriers, the executives said.

KCS is the sole railway that serves Lazaro Cardenas, offering shippers congestion-free alternatives to Long Beach, Calif., and other terminals that are plagued by heavy traffic on the water, docks and roadways, Mr. Creel said.

“It’s a three-prong approach,” Mr. Creel said. “You’ve got Vancouver in the West, you’ve got port Saint John in the East, you’ve got Lazaro in the southernmost tip. If we can provide an efficient reliable alternative, then we can … attract additional business. Connecting the Canadian markets to the Mexican markets is essential.”

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“As capacity on the West Coast gets tighter and tighter, Lazaro is going to be really valuable,” said KCS CEO Patrick Ottensmeyer, noting the port has room to double its capacity and is closer to Houston than the port of Los Angeles.

KCS’s network also has Gulf of Mexico port terminals in New Orleans and Baton Rouge, La., and Tampico and Veracruz in Mexico.

CP gained access to the Atlantic Ocean and the port of Saint John with the 2020 purchase of Central Maine & Quebec Railway.

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