Canadian National Railway officials used the term "perfect timing" to describe the company's purchase of Great Lakes Transportation.
The U.S. Surface Transportation Board has approved the acquisition, and the large Canadian company known as CN is already benefiting from taconite traffic and a stronger steel market.
Surface Transportation Board Chairman Roger Norber announced the approval April 9, subject to certain conditions. The decision takes effect May 9 and CN officials hope to close May 10.
The $380 million transaction involves the Duluth, Missabe and Iron Range Railway and ore docks, the Bessemer and Lake Erie Railroad and the Pittsburgh and Conneaut Dock Company, a rail to ship transfer operation. It includes the Great Lakes Fleet of bulk carriers, which must be approved by the Department of Justice, the Coast Guard and the Maritime Administration.
"This minor transaction connects two transportation systems that do not compete but complement each other, and will improve rail transportation in this part of the Great Lakes region," said Nober. "I expect CN will work hard to integrate the companies smoothly so that shippers in the region receive quality service."
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While CN did not return calls for comments, company officials discussed the purchase and related issues in a teleconference Thursday. CN is also in the process of purchasing government controlled BC Rail in western Canada. E. Hunter Harrison, CN president and chief executive officer, said he is looking forward to both transactions closing in the second quarter.
"We picked the perfect time for us to move into the GLT (Great Lakes Transportation) transaction," said James M. Foote, CN executive vice president of sales and marketing. "Suddenly demand has grown, there is a great opportunity there, I would expect to try and raise rates accordingly."
He said for 2003, metals and minerals hauling was up 16 percent as a result of iron ore shipments from the Mesaba Range to Prince Ruppert, Canada for export to China. Another factor was a strong steel market.
Foote said reopening of the Eveleth taconite mine was an upside they had not expected and had not been in their projected operating plan. Other CN officials characterized the deal as better than expected.
The company's 2003 annual report states the acquisition will strengthen its position in the steel industry and provide an essential link in the Chicago-Western Canada corridor.
And CN has published a service plan which includes a focus on speed, efficiency and longer trains.
During the board's review of the merger, a number of Northland officials filed various objections. Eveleth Mayor Calvin Cossalter and city councilors argued the acquisition would be a blow to the economy with the loss of about 100 jobs.
DM&IR has about 498 employees in northeastern Minnesota. About half work out of Proctor. Overall CN has about 22,000 employees. In the application, CN listed cutting 76 positions in Proctor and Duluth and transferring another 18. Management will be hardest hit with 27 cuts and four transfers.
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Frank R. Kempf, executive director of the Ashland (Wis.) Area Development Corporation, said, that until CN resolves the issues of poor service and increased rates to the wood and manufacturing industries of northern Wisconsin, he and other leaders in northern Wisconsin will oppose any future expansion of CN in the United States.
Kempf said that since CN purchased Wisconsin Central service has declined.
Ispat Inland, formerly Inland Steel Company, raised a similar concern based on past problems shipping taconite pellets on CN's Wisconsin line.
Four of the unions involved advised the board that they neither supported nor opposed the application. However, some work issues were raised and a labor protection condition was included in the approval. The agreement also gives the board a one year oversight period.
The transaction will mean more mixed freight trains, especially southbound on the DM&IR lines, as it becomes part of CN's Wisconsin division.
