CN to Acquire Key Railway Operations from U. S. Steel
09/27/2007 - Canadian National Railway enters agreement to acquire the major portion of the Elgin, Joliet and Eastern Railway from United States Steel for US$300 million.
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"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 U. S. Steel will be able to focus on the railroad assets serving Gary Works."
John P. Surma
U. S. Steel Chairman and CEO
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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.
Owned by U.S. Steel's Transtar subsidiary, the Elgin, Joliet & Eastern Railway (EJ&E) serves steel mills, petroleum and chemical plants, and a diverse group of distribution centers, handling a full range of commodities, from bulk raw materials to finished products. Coal is also moved to utility plants in Illinois and Indiana. The Class II railroad operates over 198 main line miles of track encircling the City of Chicago from Waukegan, Ill., on the north, to Joliet, Ill., on the west, to Gary, Ind., on the southeast, and then to South Chicago. Interline rail connections with all of the major railroads entering Chicago gives EJ&E customers access to the North American rail system.
According to CN, combining the two rail networks is straightforward and will allow EJ&E's existing traffic to be moved more efficiently and at lower cost. There are no shippers served only by CN and EJ&E (2-to-1 shippers) who will lose direct rail competition as a result of the acquisition, nor will there be any other adverse impacts on competition. As in past transactions, CN is committed to keeping gateways open and honoring trackage rights agreements with all connecting carriers.
Owned by U.S. Steel's Transtar subsidiary, the Elgin, Joliet & Eastern Railway (EJ&E) serves steel mills, petroleum and chemical plants, and a diverse group of distribution centers, handling a full range of commodities, from bulk raw materials to finished products. Coal is also moved to utility plants in Illinois and Indiana. The Class II railroad operates over 198 main line miles of track encircling the City of Chicago from Waukegan, Ill., on the north, to Joliet, Ill., on the west, to Gary, Ind., on the southeast, and then to South Chicago. Interline rail connections with all of the major railroads entering Chicago gives EJ&E customers access to the North American rail system.
According to CN, combining the two rail networks is straightforward and will allow EJ&E's existing traffic to be moved more efficiently and at lower cost. There are no shippers served only by CN and EJ&E (2-to-1 shippers) who will lose direct rail competition as a result of the acquisition, nor will there be any other adverse impacts on competition. As in past transactions, CN is committed to keeping gateways open and honoring trackage rights agreements with all connecting carriers.
CN plans to invest approximately US$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. CN expects 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.
The acquisition is subject to regulatory review by the U.S. Surface Transportation Board (STB). Both CN and U. S. Steel believe that if the application is approved by the STB as filed, it should allow closing in mid-2008.
Canadian National Railway Co. and its operating railway subsidiaries spans Canada and mid-America, from the Atlantic and Pacific oceans to the Gulf of Mexico. CN operates the largest rail network in Canada and the only transcontinental network in North America, including approximately 20,300 route miles in eight Canadian provinces and 16 U.S. states. CN has the shortest route from the Atlantic coast to the U.S. Midwest through the Paul M. Tellier Tunnel between Sarnia, Ont., and Port Huron, Mich. The tunnel handles double stack containers and the largest automotive carriers in service. CN's revenue is derived from movements of a balanced mix of goods between diverse origins and destinations. Approximately 77 percent of CN's revenue comes from U.S. domestic operations, Canada/U.S. transborder operations, and offshore traffic, with 23% generated from Canadian domestic operations. CN's 2006 revenue was C$7.9 billion (US$7.9 billion).
CN's business strategy is guided by five core principles: providing good service, controlling costs, focusing on asset utilization, committing to safety, and developing people.
United States Steel Corp. is an integrated steel producer focused on high value-added steel sheet and tubular products. U. S. Steel has major production operations in the United States and Central Europe with more than 46,000 employees worldwide and an annual raw steel production capability of 26.8 million net tons. The company is also engaged in several other business activities including the production of iron ore pellets in the United States and the production of coke in both the United States and Central Europe; transportation services (railroad and barge operations); and real estate operations.
United States Steel Corp. is an integrated steel producer focused on high value-added steel sheet and tubular products. U. S. Steel has major production operations in the United States and Central Europe with more than 46,000 employees worldwide and an annual raw steel production capability of 26.8 million net tons. The company is also engaged in several other business activities including the production of iron ore pellets in the United States and the production of coke in both the United States and Central Europe; transportation services (railroad and barge operations); and real estate operations.
