MONTREAL — Canadian National Railway Co., Canada’s largest railway and the No. 5 in North America, said on Friday that it had begun exclusive talks to acquire publicly owned Ontario Northland Rail, reported Reuters.
CN officials declined to divulge financial terms, but said they hoped to reach an agreement with the province of Ontario this year and conclude the transaction in the first quarter of 2003.
Ontario Northland operates rail freight and passenger services over a 1,100 km (700-mile) network serving resource-rich northeastern Ontario and northwestern Quebec. It has annual revenues of about C$50 million ($32 million) and 700 to 800 employees in its rail division.
Major freight customers include big metals companies such as Noranda Inc. (Toronto:NRD.TO – News) and Falconbridge Ltd. (Toronto:FL.TO – News), and forest products concerns such as Abitibi-Consolidated Inc. (Toronto:A.TO – News) and Tembec Inc. (Toronto:TBC.TO – News).
Keith Heller, senior vice-president of CN’s Eastern Canada division, said the goal of acquiring Ontario Northland Rail was part of CN’s strategy to keep increasing its revenues.
“All of our acquisitions have been about extending reach, about growing the top line, about creating more value for our customers and this is consistent with that,” he told Reuters.
Any definitive agreement on Ontario Northland Rail would be subject to reaching a labor agreement with the railway’s unionized workers and gaining Ontario government approval.
Ontario Northland also provides bus, ferry and telecoms services in remote regions of Ontario, which has been looking to privatize or sell the 100-year-old operation.
CN said it plans to maintain current employment levels at Ontario Northland Rail’s shops in North Bay, Ontario, and invest in new equipment and rolling stock.
Providing passenger rail services is part of a new trend at CN, which until recently has focused on freight.
CN provides track for passenger rail services across Canada, mainly by federally owned Via Rail, and in the United States for operations such as Amtrak. Through its acquisition of Wisconsin Central, CN also offers retail passenger service in Ontario and the United States.
CN also appears interested in BC Rail, Canada’s third-largest railway, which is owned by the province of British Columbia. Like Ontario Northland, it is dependent on CN to connect to the rest of the North American network.
British Columbia has sent mixed signals on BC Rail’s fate. The government has said the struggling 2,400-km (1,500-mile) rail line will not be privatized, but is also offering to sell some of its lines and port operations in Vancouver.
CN shares closed up 27 Canadian cents at C$68.63 on the Toronto Stock Exchange on Friday.