Dive Brief:

• Canadian National Railway Company acquired Manitoba-based trucking company TransX for an undisclosed sum, according to press releases from both parties. The two freight companies struck a deal in October and confirmed completion last week, having apparently made it through the regulatory hurdles. 
• TransX is one of the oldest trucking companies in Canada and has been partnering with CN for many years, according to CN's release. With this deal, CN will gain 1,500 trucks, 4,000 trailers, 1,000 intermodal containers and chassis, 12 terminals spanning western and eastern Canada, Chicago and Eagan, Minnesota and 3,000 employees, according to FreightWaves. 
• "What TransX is, is a company who is in the intermodal business and we believe they can help us to bring more business to the CN railroad using our network. In that case, specifically Halifax to Vancouver, to divert traffic from the road to railroad," CN CEO JJ Ruest said on the railroad's January earnings call. TransX will remain in Winnipeg, Manitoba, and continue to function independently, according to the trucking company's release. 

Dive Insight:

Railroads are increasingly looking to compete with trucks. Common strategies to do so are improving reliability and the quality of service. They're also working to optimize their profitability so they can better compete on price.

Another much less common strategy is to bring trucking capacity in-house in order to create a value-added service that includes rail transport and drayage. 

It's retail freight, in the form of intermodal shipments, that railroads want to take off the road. CN's intermodal revenue was up 9% in the fourth quarter of 2018. Last year was record-breaking for intermodal rail freight, bolstered by high trucking rates and lacking capacity. Railroads are not expected to have such luck in 2019, but Ruest remains bullish. 

"With regard to competitiveness, we compete every day. We win business every day. We may lose a little bit. But if you look at our track record on the intermodal side over the last five years, I think our batting average is extremely good," he said on the earnings call. CN said in a press release another volume segment it's looking to build up is temperature-controlled freight. 

Ruest acknowledged the acquisition of TransX represents a change in strategy for the railroad and suggested more strategic deals that can help to "make more use of the existing network," could be on the way. This deal is intended to present a more attractive service for shippers and make more attractive an underused part of CN's network.

The move to offer a seamless, vertically integrated service is rare in rail transport, but it's less so in other freight modes. Several ocean carriers, including CMA CGM and Maersk, are also building end-to-end offerings.