U.S. Steel Corporation (USS) and Canadian National Railway Company (CN) have announced the approval of an agreement under which CN will acquire from USS’s Transtar subsidiary the major portion of the Elgin, Joliet, and Eastern Railway Company (EJ&E) for (U.S.) $300 million.

Under the agreement, USS’s Transtar subsidiary will retain railroad assets, equipment, and employees which support the Gary Works and the steelmaking operations of USS. Transtar’s remaining operations will become the Gary Railway.

According to a statement released on Wednesday, the acquisition of the EJ&E will “significantly improve the fluidity of CN’s rail operations in the Chicago region, rewarding customers with faster transit times and more reliable service.”

EJ&E, a Class II railroad owned by USS’s Transtar subsidiary, operates over 198 main line miles of track encircling Chicago from Waukegan, Ill., on the north, to Joliet, Ill., on the west; to Gary on the southeast, and then to South Chicago.

“This transaction is positive for all involved,” said USS Chair and CEO John Surma. “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.”

“This acquisition is good news for railroading in Chicago,” CN President and CEO E. Hunter Harrison said. “Chicago is essential to CN’s rail operations, yet it presents us with major operation 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.”

“The combination of the two rail networks is straightforward and will allow EJ&E’s existing traffic to be moved more efficiently and at lower cost,” the statement said. “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.”

The 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 material to finished products. Coal is also moved to utility plants in Illinois and Indiana.

The EJ&E, employing 700 people, owns 58 locomotives and operates a fleet of general service and specialized railroad equipment. Interline rail connections exist with all of the major railroads entering Chicago, giving EJ&E customers access to the whole of the North American rail system.

CN, employing 21,700 people, operates the largest rail network in Canada and the only transcontinental network in North America, with 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 Midwest through the Paul M. Tellier Tunnel between Sarnia, Ontario, and Port Huron, Mich. The tunnel handles double stack containers and the largest automotive carriers in service.

Posted 9/27/2007