CN buys BC Rail for $1 billion

MONTREAL, (Nov. 26, 2003) — Canada’s largest railway just got bigger — continuing its expansion plans with a $1 billion cash purchase for the rights to operate Crown Corporation B.C. Rail.

Canadian National Railway said it hopes to attract new shippers with the announcement of the deal, which is based on a 60-year lease, the Canadian Press reported yesterday. CN said the purchase expands the company’s western operations, specifically in resource sectors such as forestry and lumber. CN already has strong market share in the pulp and paper sector.

B.C. Rail is Canada’s third largest railway, operating on over 2,000 km of track in British Columbia with a main line that runs from Vancouver to Fort Nelson. It’s main markets are coal, forestry, and lumber, the latter of which made up almost 70 per cent of operations.

The railway beat out bids from Canadian rival Canadian Pacific Railway, as well as a U.S. group led by rail giant Burlington Northern Sante Fe Corp and short-line operator OmniTrax. Despite government promises at the time not to sell the railway, Denver based- OmniTrax was one of the first companies to express interest in B.C. Rail two years ago, offering to buy or operate the railway after the company announced it would halt intermodal service.

CN CEO Hunter Harrison told Canadian Press the rail purchase — the second in recent weeks — will add to the company’s profits in the first year of operation. Last month, the company announced it was paying $500 million for eight Great Lakes vessels and two regional U.S. railroads that ship iron ore between Minnesota and Pittsburgh.

CN said it plans to cut about 430 jobs through retirements and attrition.

Among other plans for B.C. Rail, CN promises to: Assemble forest products trains in Prince George for scheduled express trips to the continental rail hub in Chicago; Invest up to $15 million in infrastructure to accommodate double-stack container trains on its BC North line; and acquire 600 new centrebeam cars and upgrade 1,500 boxcars to accommodate anticipated truck share gains for forest products.

— from Canadian Press

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