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Canadian Pacific To Sell West End Of Its DM&E Line To Genesee & Wyoming

Canadian Pacific Railway Ltd. (CP: Quote, CP.TO) said Thursday that it has agreed to sell the west end of its Dakota, Minnesota & Eastern line to Genesee & Wyoming Inc. (GWR: Quote) for continued rail operations.

The purchase price is about US$210 million, subject to certain adjustments including the purchase of inventory, equipment and vehicles. 

The west end encompasses about 660 miles of Canadian Pacific's current operations between Tracy, MN and Rapid City, SD; north of Rapid City to Colony, WY; south of Rapid City to Dakota Jct., NE; and connecting branch lines, as well as trackage from Dakota Junction to Crawford, NE, currently leased to the Nebraska Northwestern Railroad Customers on the line ship about 52,000 carloads annually of grain, bentonite clay, ethanol, fertilizer and other products. 

The asset sale is expected to close by mid-2014. Upon closing, the new railroad will be named the Rapid City, Pierre & Eastern Railroad. Genesee & Wyoming expects to hire about 180 employees to staff the new company and anticipates those employees will come primarily from those currently working on the rail line.

For Canadian Pacific, it is anticipated the sale will result in a net after-tax write down of about US$240 million, subject to closing adjustments, which will be recorded in the company's fourth quarter 2013 financial statements. 

The deal is cash positive for Canadian Pacific and the sale will not have a material effect on anticipated future earnings. 

For Genesee & Wyoming, it is expected the deal will generate annual revenues of about $65 million and be immediately accretive to book and cash earnings per share in 2014.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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