December 02, 2008

Canadian National to buy rail line from US Steel

Canadian National Railway Company and United States Steel Corporation announced that their respective Boards of Directors have approved an agreement under which Canadian National will acquire the major portion of the Elgin, Joliet and Eastern Railway Company for USD 300 million.

The acquisition will significantly improve the fluidity of Canadian National’s rail operations in the Chicago region, rewarding customers with faster transit times and more reliable service. Under the agreement, US Steel’s Transtar subsidiary will retain railroad assets, equipment and employees that support the Gary Works site in Northwest Indiana and the steelmaking operations of US Steel. Transtar’s remaining operations will become the Gary Railway. The acquisition is subject to regulatory review by the US Surface Transportation Board. Both Canadian National and US Steel believe that if the application is approved by the STB as filed, it should allow closing in mid 2008.

Canadian National plans to invest approximately USD 100 million for integration, new connections, and infrastructure improvements to add capacity on the EJ&E line and allow network synergies to be realized over time. The acquisition, which will be financed with debt and cash-on-hand, is expected to be slightly accretive to Canadian National’s diluted earnings per share in the first year following STB approval.

Mr E Hunter Harrison president & CEO of Canadian National said “This acquisition is good news for railroading in Chicago. Chicago is essential to Canadian National’s rail operations, yet it presents us with major operational challenges. This transaction will improve rail operations on the Canadian National system and the rest of the Chicago rail network by moving Canadian National trains out of the urban core to EJ&E lines on the outskirts of the Chicago metropolitan area.”

Mr John P Surma chairman & CEO of US Steel said “This transaction is positive for all involved. Our EJ&E employees and customers, and the communities in which we operate will benefit from the EJ&E being part of a large Class I railroad, while US Steel will be able to focus on the railroad assets serving Gary Works.”

Mr Harrison said “This acquisition not only will give CN an opportunity to expand its service to the North American steel industry, but also will drive new efficiencies and operating improvements on CN’s network. Streamlined rail operations and reduced congestion resulting from this acquisition will benefit current CN and EJ&E customers, the City of Chicago, nearby communities, and the overall rail network in the region.”