FEBRUARY 13, 2001
WHO WILL BUY CP RAIL?
SASKATOON, Sask.--"We may have moved one step closer to a railway monopoly in Canada. CP Limited stated that one reason that it will break into five companies is so that its newly-freed component businesses can buy competitors, or be bought by them," said NFU Transportation Committee member Jim Robbins.
Robbins was commenting on today's announcement by CP Limited that it would spin off its businesses into five publicly-traded companies: PanCanadian Petroleum, CP Railways, CP Ships, Fording, and CP Hotels.
In its news release, CP stated its aim to maximize shareholders' value. "In order to maximize the value of newly-created CP Rail shares, that railway would likely have to be sold. I think CN would be very interested," said Robbins.
"There has never been any significant competition between CN and CP. The purchase of one by the other would end the fiction that we have, in Canada, anything other than a railway monopoly," said Robbins.
Robbins noted the parallels with Air Canada. "The real world is not one of competition, it is one of mergers designed to decrease competition. Unlike air travel where competitors can enter, if one railway owns all the track in Canada the railway equivalent of WestJet will find it nearly impossible to enter the market," said Robbins.
He noted another possibility: that CP Rail would be bought by a U.S. carrier. Union Pacific expressed interest in CP following last year's announcement that Burlington Northern Sante Fe was attempting to buy CN. Many analysts thought that BNSF/CN and UP/CP mergers could trigger further consolidation, leaving just two railways in North America. In March 2000, the U.S. Surface Transportation Board put a 15-month moratorium on mergers affecting U.S. carriers.
"A U.S. carrier buying CP Rail initially seems a better alternative: it would maintain competition. A U.S. takeover of CP, however, would renew interest in a CN merger and may move us to just two North American carriers. This would have two negative effects: there would be little competition between two continental supercarriers; and Canada would find it nearly impossible to pursue a regulatory structure significantly different than that of the U.S. We could, in effect, lose our ability to regulate transportation of key commodities such as grain or minerals," said Robbins.
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For More Information:
Jim Robbins, NFU Trans. Committee member: (306) 493-7048 or (306) 493-2569
Darrin Qualman, Executive Secretary: (306) 652-9465