CP to shed U.S. Plains grain track

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Over 1,000 km of Canadian Pacific Railway (CP) track, used mainly to haul grain across South Dakota, are set to be sold as the company streamlines its U.S. operations.

CP on Thursday announced a deal to sell the western portion of its Dakota, Minnesota + Eastern (DM+E) line to Connecticut-based shortline operator Genesee + Wyoming Inc. (G+W) for $210 million (all figures US$).

G+W, whose international holdings include eight shortlines in Eastern Canada, plans to operate the line as the Rapid City, Pierre + Eastern Railroad, pending approval from the U.S. Surface Transportation Board and other closing conditions being met.

The track in question includes 1,062 km running from Tracy, Minnesota west to Rapid City, S.D., and from Colony in northeastern Wyoming through Rapid City to Dakota Junction in the northwest corner of Nebraska.

The deal also gives G+W ownership of a short stretch of track from Dakota Junction southwest to Crawford, Nebraska, which CP today leases to Nebraska Northwestern Railroad (NNW).

The track to be sold now handles about 52,000 carloads of grain, bentonite clay, ethanol and fertilizer per year. The new line will interchange with CP, Union Pacific, BNSF and the NNW.

“Strategic review”

Calgary-based CP, which bought the DM+E railroad for $1.48 billion in 2008, will still own and operate just over 3,000 km of DM+E track in the U.S. once the deal closes, now expected by mid-2014.

CP said the deal follows a “comprehensive strategic review process” it launched in late 2012, and describes the sale as part of its “ongoing transformation to make its network stronger for its entire customer base.”

CP CEO Hunter Harrison, in a release Thursday, described the line as a “strong long-term franchise,” noting South Dakota “remains an important economic driver in the Midwest.”

CP expects to book the sale in its fourth quarter of 2013 as a net after-tax write down of about $240 million, while G+W expects the new track to generate revenue of about $65 million a year.

G+W said it expects to hire about 180 employees to staff the Rapid City, Pierre + Eastern line — mainly from those now working on the line for CP.

G+W, which runs regional freight track and shortlines in the U.S., Australia, Belgium and the Netherlands, also operates eight lines in its “Canada region” including the Cape Breton + Central Nova Scotia, Goderich-Exeter, Huron Central, Ottawa Valley, Quebec Gatineau and Southern Ontario railways, St. Lawrence + Atlantic Railroad and Western Labrador Rail Services. — AGCanada.com Network

Related story:
CPR to buy northern U.S. railway, Sept. 5, 2007