Canada's rail giant celebrates a landmark by firming up holdings
One hundred years ago, poverty-stricken immigrants from the Scottish Highlands who had made their money in Canadian fur trading and banking founded the Canadian Pacific Railway. Canadian Pacific Ltd. is now the nation's second-largest corporation, after General Motors of Canada, with sales in 1984 of C$376.9 million. And for its 100th anniversary, which was marked officially last week, CP is celebrating by buying the outstanding shares of its biggest operation, Canadian Pacific Enterprises Ltd.
CPE was formed in 1962 when the company was worried about nationalization. It wanted to separate the railway from other assets, especially oil, gas, and mining operations. There is little fear of nationalization today, and CP wants its profitable enterprise back as a subsidiary, not a publicly traded company.
Canadian Pacific runs one of the longest -- 14,924 miles of track -- and most profitable railways in the world; owns Canada's largest private airline; is in shipping, trucking, and hotels in Canada and throughout the world; and has rich holdings in oil and gas.
The oil and gas come from the land given the company when it built the railway. The wily Scots kept mineral rights to the land. CP's oil and gas subsidiary, PanCanadian, has interests in 8.4 million acres, with 6.7 million acres of it freehold. PanCanadian leases to other companies 3.1 million acres that it owns freehold.
PanCanadian, a subsidiary of CPE, is the biggest money earner in the CP stable. It earned C$261 million last year and looks as if it will earn C$275 million this year.
The next biggest money earner is CP Rail, which brought in C$185 million last year. One of the reasons the railway makes money is that it dumped its unprofitable passenger services in the mid-'70s. They are now run by a money-losing government company called Via Rail. CP Rail is left with the profitable freight business.
To make it easier to ship coal, grain, potash, and lumber from Pacific ports, CP Rail is spending C$600 million to blast a nine-mile tunnel through the Rocky Mountains. When it is finished in 1988, the railways' freight capacity through the Rockies will go from 60 million to 90 million tons.
CP Air is in the middle of a takeover battle to get a bigger piece of the rich market in central Canada. Right now it is primarily a western Canadian airline. It wants to buy Nordair, which has routes principally in Ontario and Quebec.
Despite the company's diversity, its bread and butter is still the railway and the oil and gas that were discovered along the right of way. ``Ninety percent of CP's earnings are in the railway and oil and gas,'' says Neil Wickham, an analyst who covers Canadian Pacific for the Toronto brokerage house of Walwyn, Stodgell.
One of CPE's poorer investments is CIP, what used to be Canadian International Paper, a subsidiary of International Paper. CP bought the forest products company in 1981 for C$1.1 billion. It has yet to turn a profit. Interest on the C$850 million loan used to finance the sale is a drain on the profitable bits of CPE.
The building of the Canadian Pacific Railway was in many ways the building of Canada. It connected the British colonies in Ontario, Quebec, and the Maritime Provinces with British Columbia. It opened up the prairies to settlement by Ukrainians and other immigrants who knew how to grow wheat in cold weather. And it stopped the Americans from moving north.