SOLD: DM&E to Canadian Pacific for $1.48 billion
September 5th, 2007 10:37 am by DJ DHat tip to Bluestem Prairie.
The Dakota Minnesota and Eastern (DM&E) has been sold to the Canadian Pacific company for $1.48 billion. Additional payments of $350 million up to $1.1 billion can become due if the much controversial expansion into the Wyoming Powder River Basin occurs. DM&E had been on the auction block since May after the $2.3 billion federal loan they had requested was denied in February. The Winona Daily News has the story from the AP:
SIOUX FALLS, S.D. (AP) _ Canadian Pacific Railway Ltd. said late Tuesday that it will buy the Dakota, Minnesota & Eastern Railroad Corp. and its subsidiaries for $1.48 billion cash, gaining access to the coal-rich Powder River Basin in Wyoming.
Canadian Pacific said in a news release that it will pay $1.48 billion in cash at closing and make future contingent payments of up to $1 billion depending on progress on a long-planned expansion project by the Sioux Falls-based DM&E to carry coal from Wyoming’s Powder River Basin.
CP said the deal will expand its current network by approximately 2,500 miles and increases its access to Midwest markets for agricultural products, coal and ethanol.
“The DM&E is an excellent fit for Canadian Pacific making this a strategic end-to-end addition to our network,” Fred Green, president and CEO of CP, said in the statement. “The DM&E is a high-quality, growing regional railroad that complements our existing franchise.”
CP said it intends to spend an additional $300 million on further upgrades of the regional railroad over the next several years.
“Canadian Pacific is our natural partner and we are very pleased with this deal. The logic of this acquisition is compelling,” Kevin Schieffer, president and CEO of the DM&E, said in the statement. “I’m proud of the DM&E and the organization we’ve built. … CP is not only a natural operating fit; we also share a commitment to our employees, our customers and the communities we serve as well as a vision for the potential of the Powder River Basin.”
It wasn’t immediately clear precisely how the sale would affect the DM&E’s $6 billion Powder River Basin project, which involves rebuilding 600 miles of track across South Dakota and Minnesota and adding 260 miles of track around the southern end of the Black Hills to the Wyoming coal fields. The rebuilt railroad would haul low-sulfur coal east to power plants.
The project has aroused strong opposition in some communities along the route, especially in Rochester, Minn., where the DM&E’s tracks pass close to the Mayo Clinic.
The sale is expected to close in the next 30 to 60 days and is subject to review and approval by the U.S. Surface Transportation Board.
More as it comes in. I am headed to Winona today for a hearing facilitated by the Surface Transportation Board discussing historical preservation procedures for the increased rail traffic that would come with the proposed expansion.
[Update] The Rochester Post Bulletin has put together a neat little summary of the details of the DM&E’s sale to the Canadian Pacific Railroad.
• Price: $1.48 billion, due at closing within next 30 to 60 days.
• The purchase includes DM&E and a sister railroad, the Iowa, Chicago & Eastern. That system includes 2,500 miles of track, 7,200 rail cars and 150 locomotives. The acquired railroads have about 1,000 employees.
• The deal includes future contingent payments of $350 million if Powder River Basin expansion project construction starts before Dec. 31, 2025, and $700 million based on coal movement over the line by that same date.
• Canadian Pacific announced it intends to invest $300 million upgrading DM&E’s line over the next several years.
• The sale is expected to close in the next 30 to 60 days and is subject to review and approval by the U.S. Surface Transportation Board.
Things that make you go “hmmm”:I find it interesting that the Canadian Pacific plans to invest only $300 million into upgrades when the DM&E had previously requested about eight times that from the federal government.
This article we missed from the UK Financial Times published Aug. 13 shows the writing on the wall for the sale: DM&E: Second round bids imminent; unclear if financing commitment still in place.
Time for this blogger to head to Winona. [/Update]
September 21st, 2007 at 5:26 pm
[…] have to be reignited at our alma mater. DJ covered the DM&E sale to Canadian Pacific in a post a short little while ago. Recently, Congressman Walz and Oberstar met with Rochester leaders to […]