Aug 10, 2021
Wow. That is a great map. Really illustrates some big potential.
Whichever one winds up with KCS should change their name to Big Overbearing Rail Group. That way, when Star Trek fans see their reporting marks, they'll know what they're looking at.
Ha ha. After this, there is not much remaining for anyone to assimilate.
I "stole" it from the an article over in the "External Feeds" section.
As of this morning, it looks like the CP+KCS deal is done at a cost of $31 Billion of cash and stock.
Has CN bowed out? Been shut out? Or still bumbling along?
CN has admitted defeat and is packing it in. I think CN senior management's next assignment is figuring out how to keep their jobs in the face of TCI Fund Management's want to toss them out.
Good. Glad to hear CN is out. As much as I dislike the possibilities under a TCI takeover, I do hope current CN management gets their rears booted.
Given that CN gets paid $700Million in walkaway fees, I suspect they will be fine after they take their cuts.
Is that why they waited to pull out of the doomed deal days after STB said no voting trust, and TCI said it's time to change the board? $700,000,000?!?
Merger partners often sign a breakup agreement as insurance against an interloper who arrives later with a superior offer. The CN vs CP battle resulted in an odd outcome, where CN now gets back the $700 Million they paid to KCS when CN for wrecked the CP+KCS marriage (so, a net $0 to CN) and CN gets another $700 Million from KCS because CP wrecked the CN+KCS marriage. It all makes my head spin.
While CN management remains in the hot seat for fumbling the deal, CPs leaders will soon feel intense heat to spin profits out of their $31 Billion investment in KCS.
Exactly. And this is where we will see facilities closed, families uprooted or jobs lost, communities effected by loss of rail service (the trucking folks smiling), reduced property and business tax revenues, more hiking trails created (tax money outflow), and...... The proof of this is all around us, and undeniable.
The only duplication is in Kansas City, so there's not much opportunity to shut down redundant facilities.
I'm curious how the merger plays out in terms of partnerships with other railroads, such as the bridge service KCS provides to NS to bring them into the Dallas-Fort Worth market. It is rare to see a KCS 101 job at BNSF's Alliance yard that doesn't include at least one NS unit in the consist. In fact the NS units often outnumber the KCS units on that train. I'm also curious if the BNSF/KCS Robbstown to Chicago trains are affected.
The other angle I'm curious about is the mingling (if any) of seniority rosters, crew districts and operating agreements. It's my understanding that CP in the states did away with the legacy union contracts in favor of hourly rates of pay where KCS still has agreements similar to what I deal with at the big orange. All these years later we still deal with different rates of pay, placement and displacement rules, different rules for time off, etc., depending on whether you're working on former Santa Fe, Frisco or BN/FW&D property, and BNSF has been around longer than BN existed. I can only imagine what it will be like at the combined CPKC.
They will likely look at such things as centralizing dispatching, maintenance points being combined, attrition and more. Even though KCS has their version of PSR, CP's vision of it may differ. I am certain they won't be looking at recouping the $31 billion, long term, simply by running trains. They will find ways to nibble away at it, or more.
Who would have ever thought a facility such as BNSF at Interbay (Seattle), would ever go away? But it is. Scattering people and the work once done there. All about cost savings and convenience.
Thanks everyone for not beating up "Shareholders" too much. It seems increasingly popular on forums to villainize rail shareholders as wealthy, greedy and shortsighted, when many of them are like me -- small time folk simply investing in an industry they know. I've owned NS (via CR) and CN (via IC) for nearly 25 years and am glad to be on board with both. It bugs me when I read posts (mostly elsewhere) from people who incorrectly portray investing in stocks as some sort of risk-free elitist venture reserved only for the rich. Whether they realize it or not, most anyone with an IRA or 401-k is likely a market participant.
Thanks again for letting this Shareholder vent a little here with friends.
I'm less worried about the shareholders being rich, greedy and shortsighted than the board themselves.
Yes, no doubt as a small shareholder, you're along for the ride without much influence. Looking at the lack of qualifications of Boardmembers of some firms is shocking, with failed CEOs, wives of deceased founders, politicians and people lacking experience in anything who curiously appear on other Boards. After mergers, Boards often bloat to nearly two dozen people before attrition whittles their numbers down. In the interim, that's a lot of doughnuts to make ready for breakfast meetings.
So many people are stockholders, who do not even know it. Their retirement packages are invested in a lot of things....
Frankly, anyone disparaging individual investors as the downfall of railroading doesn't have the slightest idea what they're talking about. The investors who have brought such massive change are not individuals but institutions with the ability to purchase large quantities of stock for the purpose of remaking the board as they see fit. Bill Ackman and Pershing Square Capital did exactly that with Canadian Pacific and Paul Hilal of Mantle Ridge did that with CSX. They did so because they saw companies that were undervalued but simultaneously unhealthy and bloated. Their motivation was not to leave behind a better railroad but to improve the operating ratio in order to increase the stock price and realize a return on their investment. To that end, Pershing Square Capital's investment was a great success and a model for Mantle Ridge and others to follow. Both of them cashed out after the easy money was made and the railroads are left dealing with the consequences.
It reminds me of how hydraulic fracturing can take an old, lackluster oil and gas play and breathe new life into it. Railroads were doing fine making money for their investors. But then a radical new approach was introduced and suddenly everywhere you looked there was profit to be made.
The trouble with this boomtown mentality of taking every possible profit when it first appears is that it can do damage to the company and hinder its ability to deal with changes in the economy, traffic patterns, etc. And with a slow and lumbering regulatory body overseeing the changes and responding to customer complaints the tables can turn quickly. A company that looked wise for trimming fat during a downturn can quickly appear foolish for cutting so deep that it can't respond when the economy picks back up.
That's the thing with these activist hedge funds: they are gone when it's time to pick up the pieces. That's fine with their leadership and their customers, who have realized a handsome return if the fund was successful in its takeover and timed their exit correctly. After all they have a fiduciary duty to act in the interest of their company. But the poor suckers who thought the railroad was doing well since the takeover (and worse yet their customers and employees) are inevitably surprised to learn all the profits went to the hedge fund and they cashed out. It's like the fable of killing the goose to get all the golden eggs at once. Decades ago a company would be taken over and parted out for scrap like a wrecked Buick at a junk yard. The goose is gutted with one swift stroke of the blade. But now the death comes by a thousand cuts. Pieces are sold, employees laid off, service is cut or canceled. Can the goose hop around on one leg, fly with one wing and eat with half a beak? The cuts just keep coming until it's one too many and the numbers show it's time to cash out. Either way the goose dies and the gold is gone.
I look forward to a time when railroaders and not robber barons run railroads again. When a leader is at the helm of an organization he or she knows will be around and must be around after his or her tenure the style of leadership is much different than what we've seen over the past ten years. Railroads have a duty to the public as common carriers and they play a vital role in our respective countries' ability to respond to disaster, war, discovery and growth and to trade with each other. They are not merely vessels of cash to be depleted and left behind for the individual investors to nurse back to health. Or worse as another "too big to fail" institution that's socialized in the red and privatized in the black.
In the PSR frenzy that swept North American railroads a few years ago, Matt Rose - the former CEO and Chairman of BNSF - warned that PSR could doom railroads and lead to an era of re-regulation. I hoped he would be taken seriously at the time, but voices like his are never heard above the sounds of making money.
By the way, I'm not just a railroader I'm also an investor. Call me sentimental but I still believe there's a future in railroading even if it's bleak right now.
And if a rail investment goes belly up, the certificate is suitable for framing.