(Bloomberg News circulated the following story by Angela Greiling Keane and Hugo Miller on December 24.)
CHICAGO — Canadian National Railway Co., the country’s largest railroad, won U.S. approval for the $300 million acquisition of a Chicago-area line from U.S. Steel Corp. to bypass congestion in the city.
The purchase of the Elgin, Joliet & Eastern Railway Co. can be completed subject to certain conditions, including payment for school- and pedestrian-safety measures, the U.S. Surface Transportation Board said today in a statement on its Web site.
“The transaction will not result in a substantial lessening of competition, the creation of a monopoly or a restraint of trade in freight surface transportation in any region of the United States,” the Washington-based board said.
Buying the EJ&E will give Canadian National a route that skirts traffic tie-ups in Chicago, where all four big U.S. carriers operate. Union Pacific Corp., the largest U.S. railroad, told regulators this month that its rights to use the EJ&E were being impeded by Montreal-based Canadian National.
The Canadian railroad was pleased with the U.S. board’s approval, while disappointed with “significant additional” conditions that went beyond recommendations in the agency’s environmental impact statement, Chief Executive Officer Hunter Harrison said in a statement.
The company said it expects to close the acquisition shortly after Jan. 23, when the board’s decision takes effect.
Canadian National climbed 61 cents, or 1.5 percent, to C$42.34 at 1:12 p.m. in Toronto Stock Exchange trading. The exchange closed early before the Christmas holiday.
U.S. Steel fell 42 cents, or 1.2 percent, to $34.04 in New York Stock Exchange composite trading. The Pittsburgh-based company will retain a portion of the freight line supporting its Gary Works in northwest Indiana and rename it the Gary Railway.
Traffic Complaints
Canadian National and U.S. Steel agreed on the sale in September 2007, setting in motion a regulatory-approval process that included complaints from cities in Illinois and Indiana along EJ&E tracks about increased rail traffic.
Today’s STB’s decision acknowledged the concerns, saying the rail-line purchase would create “adverse environmental impacts.”
Terms imposed on Canadian National by the STB include paying most of the cost for two projects to separate EJ&E tracks from road crossings; installing cameras along the line; and taking other safety steps.
The railroad also must submit quarterly reports to the board for five years showing it is implementing those measures and must comply with agreements reached beforehand with individual towns.