CN closes deal on Elgin, Joliet and Eastern Railway
The Canadian Press
Published Sunday, February 1, 2009 1:56PM EST
CHICAGO - Canadian National Railway Co. (TSX:CNR) says it has completed its acquisition of the principal lines of the Elgin, Joliet & Eastern Railway Co. in the U.S. Midwest around the Chicago area.
The Montreal-based railway, known as CN, said Sunday the deal follows the Jan. 23 effective date of a conditional ruling approving the transaction by the U.S. Surface Transportation Board, the American rail regulator.
In September, 2007 CN made a bid to buy the railway from U.S. Steel (NYSE:X), which had used it to transport steel from its Chicago-area mills. The transaction was aimed at helping Canada's largest railway bypass the congested Chicago area by shipping goods along a 300-kilometre loop around Chicago to Memphis and other U.S. cities.
CN said Sunday it will now begin a measured, step-by-step integration of the acquired rail lines with its own assets.
Under the deal, the Transtar subsidiary of U.S. Steel will keep some rail assets, equipment, and employees that ship goods to and from the Gary Works steel operations in northwestern Indiana. These remaining operations will become the Gary Railway.
"With this closing, we can move forward to fulfil the promise of the EJ&E acquisition, which will help drive new efficiencies and operating improvements on CN's network," said CN president and CEO Hunter Harrison.
"Streamlined rail operations, along with reduced congestion resulting from the acquisition, are critically important to the Chicago region's economy and its continued role as one of America's most important transportation hubs."
When the purchase was first proposed by CN, it drew the ire of suburban Chicago communities fearing noise, traffic and hazardous waste problems. CN struck deals with a number of communities to ease their concerns and the Surface Transportation Board made its approval subject to a number of conditions. These include a five-year period of formal oversight, as well as a requirement that CN cover most of the cost of two projects to separate highway and rail traffic.
It also must install cameras to monitor level crossings, and take measures to ensure pedestrian safety and noise reduction.
In the acquisition deal, CN offered to pay US$300 million to U.S. Steel for the EJ&E, along with $100 million to upgrade the line.
The mitigation measures are expected to cost the railway an additional US$60 million.