Canadian Manufacturing

CP Rail selling portion of U.S. Northern Plains line for $210M

Will sell west end of its Dakota, Minnesota & Eastern line to Genesee & Wyoming Inc.

January 3, 2014  by Canadian Manufacturing Daily Staff

CALGARY and DARIEN, Conn.—Canadian Pacific Railway (CP) is selling a portion of a rail line it owns in the U.S. Northern Plains for US$210-million, according to the rail operator.

CP said it has reached an agreement to sell the west end of its Dakota, Minnesota & Eastern (DM&E) line to Genesee & Wyoming Inc. (G&W), a short line rail operator based in Connecticut.

“There is a strong long-term franchise here and we are pleased to have found a partner in Genesee & Wyoming, which will maintain a high standard of customer service,” CP chief executive Hunter Harrison said in a statement.

“South Dakota remains an important economic driver in the Midwest and CP looks forward to working with G&W.”


The west end of the DM&E line runs approximately 1,060 kilometres between Tracy, Minn., and Rapid City, S.D.; north of Rapid City to Colony, Wyo.; south of Rapid City to Dakota Jct., Neb.; and connecting branch lines, as well as track from Dakota Junction to Crawford, Neb., which is currently leased to the Nebraska Northwestern Railroad (NNW).

The new rail operation will have the ability to interchange with CP, Union Pacific, BNSF and the NNW.

The new railroad will be named the Rapid City, Pierre & Eastern Railroad, and G&W expects to hire approximately 180 people to staff the new company.

According to CP, those hires will primarily come from existing staff on the rail line.

“We are excited to be working with CP to expand G&W’s rail operations into South Dakota, as well as into Wyoming, Minnesota and Nebraska,” G&W CEO Jack Hellmann said.

“Given G&W’s commitment to safety, service and long-term infrastructure investment, we believe this transaction will significantly benefit our customers, the employees we plan to hire, the communities that we serve and our connecting Class I rail partners.”

Under the terms of the agreement,will pay roughly US$210-million for the line.

CP said it expects a net after-tax write down of roughly US$240-million, subject to closing adjustments, which will be recorded in CP’s fourth quarter 2013 financial statements.

For G&W, it is expected the transaction will generate annual revenues of approximately US$65-million.

The sale is expected to close by mid-2014, subject to approval of the U.S. Surface Transportation Board and satisfaction of other customary closing conditions.

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