(The Globe and Mail posted the following article by Terry Weber on its website on October 20.)
TORONTO — Canadian National Railway Co. said Monday it will pay $500-million to buy the railroad and related assets of Great Lakes Transportation LLC in a deal it says will expand both its rail link between Western Canada and Chicago and its role in the transportation of bulk commodities for the U.S. steel industry.
Under the agreement, Montreal-based CNR will buy to small railroads, a switching company and a fleet of Great Lakes vessels from the Monroevill, P.A.-based firm.
The assets include the 340-kilometre Duluth, Missabe and Iron Range Railway Co., a common carrier of pelletized iron ore in the United States, as well as the Bessemer and Lake Erie Railroad Co., which carries primarily coal, iron ore and limestone between Conneaut, Ohio, and steel mills in the Pittsburgh area.
As well, the agreement gives CNR the Pittsburgh & Conneaut Dock Co., a switching railroad that performs ship-to-rail and rail-to-ship transfer operations and the Great Lakes Fleet Inc., a non-railroad company with a fleet of eight vessels used to carry bulk commodities on the Great Lakes.
“CN’s acquisition of the GLT carriers will drive new efficiencies in our network, improve customer service, preserve competition and expand our participation in the steel industry’s bulk materials supply chain,” CN president and chief executive officer Hunter Harrison said.
“The transaction is also good news for the Mesabi Range iron ore-producing region of Northern Minnesota ? it will strengthen its transportation ties to the United States steel industry in the Midwest and Pennsylvania.”
Monday’s purchase is expected to add about $285-million to CN’s annual revenue. The acquisition will be financed with debt. It should be accretive to earnings per share and cash flow in the first year of control.
The purchase is expected to close by the middle of next year, provided the U.S. Surface Transportation Board determines the transaction to be a minor one under its merger rules and gives its approval.
Reviews by the U.S. Maritime Administration and Coast Guard are required for CN’s acquisition of Great Lakes Fleet. Review of CN’s acquisition of Great Lakes Fleet by the U.S. Federal Trade Commission and the Department of Justice Antitrust Division is also required.