CN to buy Chicago railroad for $300 million

CN to buy Chicago railroad for $300 million Looking to connect its rail network, Canadian National Railway Co. has reached agreement with United States Steel Corp. to pay $300 million for a major stake in the Elgin, Joliet and Eastern Railway Co. (EJ&E), a Class II railroad that operates over 198 mainline miles of track encircling Chicago.
   Under the agreement, U.S. 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 U.S. Steel. Transtar's remaining operations will become the Gary Railway.
   CN plans to invest about $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.
   'This acquisition is good news for railroading in Chicago,” said E. Hunter Harrison, CN president and chief executive officer. “Chicago is essential to CN's rail operations, yet it presents us with major operational challenges. 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.'
   Gordon T. Trafton, CN's senior vice president, Southern region, said: 'This acquisition will bring EJ&E's experienced railroaders into the CN family and will bridge what has been the missing link to connect the eastern, western and southern regions of CN's network.”
   CN said the combining the two rail networks will be straightforward, and because there are no shippers served only by CN and EJ&E there will be no adverse impacts on competition. CN added it will keep all gateways open and honor trackage rights agreements with all connecting carriers.
   The acquisition is expected to be completed in mid-2008, subject to approval by the U.S. Surface Transportation Board. The acquisition, which will be financed with debt and cash-on-hand, is expected to be slightly accretive to CN's diluted earnings per share in the first year following STB approval.