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Rail News: M&A

CN to acquire 'major portion' of Elgin, Joliet & Eastern from U.S. Steel


Three weeks after Canadian Pacific Railway announced plans to acquire the Dakota, Minnesota & Eastern Railroad Corp., CPR’s Canadian Class I counterpart has revealed an acquisition deal involving another major U.S. regional.

Today, Canadian National Railway Co. announced it reached an agreement with United States Steel Corp. to acquire a major portion of the Elgin, Joliet and Eastern Railway Co. (EJ&E) for $300 million. Known as “Chicago’s Outer Belt,” the 198-mile regional operates a mainline encircling the Windy City, reaching Waukegan, Joliet and South Chicago, Ill., and Gary, Ind.

The deal calls for U.S. Steel’s Transtar subsidiary to retain ownership of railroad assets and equipment, and continue employing workers at a Gary Works site in northwest Indiana, which will become the Gary Railway. CN would acquire the remainder of EJ&E’s operations.

The transaction is subject to Surface Transportation Board approval. Pending regulatory review, the deal could close in mid-2008.

“This acquisition is good news for railroading in Chicago … [which] is essential to CN’s rail operations, yet presents us with major operational challenges,” said CN President and Chief Executive Officer E. Hunter Harrison in a prepared statement. “This transaction will improve rail operations on the CN system and the rest of the Chicago rail network by moving CN trains out of the urban core to EJ&E lines on the outskirts of the Chicago metropolitan area.”

The deal also will provide CN what had been a missing link to connect the eastern, western and southern regions of the Class I’s network, said CN Senior Vice President-Southern Region Gordon Trafton.

The acquisition wouldn’t cause any shippers to lose direct rail competition or adversely effect rail competition, CN said. The Class I would keep gateways open and honor trackage rights agreements with all connecting carriers, which include CPR, BNSF Railway Co., CSX Transportation, Norfolk Southern Corp. and Union Pacific Railroad.

CN plans to invest about $100 million to integrate the regional, build connections, improve infrastructure and expand capacity on the EJ&E, which moves steel, petroleum and chemical products, coal, and other bulk commodities and finished goods. The regional employs 700 people.

Contact Progressive Railroading editorial staff.

More News from 9/26/2007