STB Approves Transaction That Creates New CPKC-CSX Class I Connection Linking Mexico, Texas and the U.S. Southeast

Rhea-AI Summary

The Surface Transportation Board (STB) has approved CSX (NASDAQ: CSX) and Canadian Pacific Kansas City (TSX: CP) (NYSE: CP) applications to acquire rail lines operated by Genesee & Wyoming Inc.'s Meridian & Bigbee Railroad (MNBR). This approval creates a new direct CPKC-CSX interchange connection in Alabama, linking Mexico, Texas, and the U.S. Southeast.

Key points:

• CPKC will acquire and operate the 52-mile segment between Meridian, Miss., and Myrtlewood, Ala.
• CSX will operate MNBR lines east of Myrtlewood
• A direct Class I-to-Class I interchange will be established near Myrtlewood
• MNBR will continue local service between Meridian and Myrtlewood

The transaction aims to create a new Class I corridor, enhancing service efficiency and introducing competitive shipping options. The STB approval is effective Nov. 16, 2024.

Positive

• Creation of a new direct CPKC-CSX interchange connection, potentially increasing operational efficiency
• Expansion of market reach for CSX and CPKC, connecting Mexico, Texas, and the U.S. Southeast
• Potential for increased business growth and customer base expansion
• Introduction of new competitive shipping options for customers

Negative

• None.

Insights

Transportation Industry Analyst

The STB's approval of this transaction is a significant development for the North American rail industry. It creates a new direct Class I connection between CPKC and CSX, enhancing the efficiency of east-west rail transportation across the southern United States. This strategic move will likely strengthen both CSX's and CPKC's competitive positions in the market.

The new route connecting Mexico, Texas and the U.S. Southeast has the potential to capture market share from trucking, which aligns with broader industry trends towards more sustainable freight transportation. For CSX investors, this presents an opportunity for long-term revenue growth by tapping into new markets and improving service offerings to existing customers.

However, the full impact may take time to materialize, as the approval is effective from November 16, 2024. Investors should monitor how quickly CSX can integrate this new connection into its network and capitalize on the expanded reach to drive business growth.

Logistics Expert

This transaction represents a significant enhancement to the North American rail network's connectivity. The creation of a direct CPKC-CSX interchange in Alabama will streamline logistics for shippers moving goods between Mexico, Texas and the U.S. Southeast, potentially reducing transit times and costs.

For CSX, this deal expands its reach into new markets and strengthens its competitive position against other transportation modes, particularly long-haul trucking. The improved efficiency could lead to increased rail traffic volumes and potentially higher profit margins for CSX in the long term.

Investors should consider the potential for CSX to attract new customers who previously relied on trucking or less efficient rail routes. This could translate into incremental revenue growth and improved asset utilization across CSX's network, particularly in the southeastern region.

JACKSONVILLE, Fla., Oct. 17, 2024 (GLOBE NEWSWIRE) -- CSX Corporation (NASDAQ: CSX) (CSX), Canadian Pacific Kansas City (TSX: CP) (NYSE: CP) (CPKC), and Genesee & Wyoming Inc. (G&W) today said the Surface Transportation Board (STB) has approved CSX’s and CPKC’s respective applications regarding their acquisition of the rail lines operated by G&W’s Meridian & Bigbee Railroad, L.L.C. (MNBR), which will result in the creation of a new direct CPKC-CSX interchange connection in Alabama.

Through the now-approved transaction, which was previously announced in June 2023, CPKC will acquire and operate across the 52-mile segment between Meridian, Miss., and Myrtlewood, Ala., currently owned by MNBR, while CSX will operate the lines currently operated by MNBR east of Myrtlewood. As a result, CPKC and CSX will establish a direct Class I-to-Class I interchange at or near Myrtlewood and connect shippers in Mexico, Texas and the Southeast U.S. MNBR will continue to provide local service to customers between Meridian and Myrtlewood.

“We thank the Surface Transportation Board members for their careful consideration of this vision to create a new Class I corridor providing more efficient service for existing CPKC and CSX traffic, while introducing new competitive shipping options between Mexico, Texas and the U.S. Southeast for our customers,” said Keith Creel, CPKC President and CEO. “With this new east-west Class I route, we are creating competition, providing a service that will take more trucks off the road, and growing rail transportation by expanding markets across the southern U.S., from Dallas to Atlanta and beyond.”

“This new interchange with CPKC highlights our ongoing efforts to provide sustainable rail solutions and service excellence for our customers,” said Joe Hinrichs, President and CEO of CSX. “Once complete, the interchange will help drive long-term business growth allowing customers to have greater connectivity and efficiency to reach key markets in Texas, Mexico, and the U.S. Southeast—all while providing safe and reliable service.”

“This transaction is a win for customers, who benefit from a new Class I connection in the growing Southeast U.S. and uninterrupted short line service from MNBR between Myrtlewood, Alabama, and Meridian, Mississippi,” said Michael Miller, G&W CEO.

The STB approval is effective Nov. 16, 2024.

About CSX

CSX, based in Jacksonville, Florida, is a premier transportation company. It provides rail, intermodal and rail-to-truck transload services and solutions to customers across a broad array of markets, including energy, industrial, construction, agricultural and consumer products. For nearly 200 years, CSX has played a critical role in the nation’s economic expansion and industrial development. Its network connects every major metropolitan area in the eastern United States, where nearly two-thirds of the nation’s population resides. It also links more than 240 short-line railroads and more than 70 ocean, river and lake ports with major population centers and farming towns alike. More information about CSX Corporation and its subsidiaries is available at www.csx.com. Like us on Facebook (http://facebook.com/OfficialCSX) and follow us on Twitter (http://twitter.com/CSX).

About CPKC

With its global headquarters in Calgary, Alta., Canada, CPKC is the first and only single-line transnational railway linking Canada, the United States and México, with unrivaled access to major ports from Vancouver to Atlantic Canada to the Gulf of México to Lázaro Cárdenas, México. Stretching approximately 20,000 route miles and employing 20,000 railroaders, CPKC provides North American customers unparalleled rail service and network reach to key markets across the continent. CPKC is growing with its customers, offering a suite of freight transportation services, logistics solutions and supply chain expertise. Visit cpkcr.com to learn more about the rail advantages of CPKC.

About G&W

G&W owns or leases more than 100 freight railroads throughout North America with 4,000 employees serving 2,000 customers over more than 13,000 track miles. G&W subsidiaries and joint ventures also provide rail service at more than 30 major ports, rail-ferry service between the U.S. Southeast and Mexico, transload services, and industrial railcar switching and repair. G&W is owned by Brookfield Infrastructure Partners, L.P. and GIC.

Contacts:
Media
CPKC
mediarelations@cpkcr.com  

CSX
Bryan Tucker
855-955-6397

G&W
Tom Ciuba
203-202-8926
Tom.Ciuba@gwrr.com

Investment Community
CPKC
Chris De Bruyn
403-319-3591
investor@cpkcr.com

CSX
Matthew Korn
904-366-4515

FAQ

What is the significance of the STB approval for CSX and CPKC?

The STB approval allows CSX and CPKC to acquire rail lines from MNBR, creating a new direct interchange connection in Alabama. This enables more efficient service and new competitive shipping options between Mexico, Texas, and the U.S. Southeast.

When will the new CSX-CPKC interchange connection become effective?

The STB approval for the new CSX-CPKC interchange connection is effective November 16, 2024.

How will the acquisition of MNBR rail lines affect CSX's operations?

CSX will operate the lines currently operated by MNBR east of Myrtlewood, Alabama. This will allow CSX to establish a direct Class I-to-Class I interchange with CPKC, potentially driving long-term business growth and providing customers with greater connectivity and efficiency.

What benefits does the new CSX-CPKC connection offer to customers?

The new connection offers customers more efficient service, new competitive shipping options, and greater connectivity between Mexico, Texas, and the U.S. Southeast. It aims to take more trucks off the road and expand rail transportation markets across the southern U.S.