Minneapolis no longer Canadian Pacific's U.S. headquarters in $25B deal

Canadian Pacific Railway announced Sunday that it was acquiring Kansas City Southern for about $25 billion to create the first freight rail network connecting the U.S., Mexico and Canada.

The continental partnership will affect CP's existing U.S. headquarters in downtown Minneapolis at Canadian Pacific Plaza, said CEO Keith Creel, but he said changes won't be immediate or reflective of Target's recent decision to cut one-third of its office space at its downtown headquarters.

"Our history in Minnesota runs deep," Creel said in an interview Sunday. "That role will not be diminished, it just doesn't have the title of U.S. headquarters."

Kansas City will be designated as the new U.S. headquarters for Canadian Pacific Kansas City, or CPKC, the combined entity Creel will continue serving as CEO. Calgary will be the global headquarters while Mexico City and Monterrey will remain Mexico headquarters.

It was unknown initially how CP employment numbers in the Twin Cities would be affected by the merger, though the companies boast future job creation with the new enterprise.

Creel said about 200 employees work downtown — about half as many as were working there in 2012 when the skyscraper was officially renamed Canadian Pacific Plaza, previously One Financial Plaza, after the railroad moved from its longtime home, the Soo Line Building.

An additional 500 CP employees work at the yard in St. Paul — the single largest yard in the entire CP network — and several other locations throughout the Twin Cities.

"Our dependence upon and reliance on the importance of the Twin Cities will increase and actually we don't expect any kind of job rationalization," Creel said.

Some downtown employees will transition to Kansas City, he said, but not until the deal is approved by the federal Surface Transportation Board sometime in 2022. He said employees running the dispatch operation center downtown are unionized so there will be negotiations before implementing any changes.

"There's going to be an opportunity for them to be employed in and work in Minnesota," he said, adding that might mean changing job assignments. But Creel again said that it's too soon to know how it will shake out and doesn't want people to be concerned at a moment he described as historic and transformational.

"Their anxiety should not be high. Their optimism should be high given the opportunity this represents for our company becoming stronger in Minnesota and in the Twin Cities," Creel said.

A single integrated rail system continentwide will "offer unprecedented reach," CP said Sunday, and an improved system for shippers in grain, automotive and energy sectors.

CP says that rail is more fuel-efficient than trucking, and this network will result in fewer trucks on the road. One train is the equivalent of 300 trucks, so this shift is expected to reduce emissions and traffic while improving overall safety.

The two railroads have been the best performing in revenue growth the past three years, Creel said, adding that the company is projected to generate $8.7 billion in total revenue with nearly 20,000 employees.

In total, the merged railroads will be operating 20,000 miles of rail to integrate supply chains in a more sustainable way with science-based pledges that Creel and Kansas City Southern CEO Patrick Ottensmeyer say are in line with the Paris Agreement.

"Customers, labor growth, and shareholders will all benefit from the inherent strengths of this combination, including attractive synergies and complementary routes," Ottensmeyer said.

With the merger announcement, the company hosted an investor conference call Sunday going over shares valued at $275 per share at Kansas City Southern.

Kim Hyatt • 612-673-4751