Canadian National Makes Acquisitions

Nov. 6, 2008
Canadian National Railway has acquired three rail subsidiaries and a rail-freight ferry operation from Quebec Railway Corp. (QRC)

Canadian National Railway has acquired three rail subsidiaries and a rail-freight ferry operation from Quebec Railway Corp. (QRC).

The C$ 49.8 million acquisition, which does not require regulatory approval, includes 540 miles of track in Ontario, Quebec and northern New Brunswick.

Analysts at Stifel Nicolaus noted, “It appears to us that the primary motivation for the acquisition was operational efficiency. We believe that tuck-in acquisitions, such as this one, are one of several actions the company can take to enhance its already industry-leading railway operations.”

The lines acquired were already interchanging with the Canadian National. The ferry service operates on the St. Lawrence River in eastern Quebec. CN sold the rail lines to QRC in the late 1990s and has held a minority equity interest in the ferry operation since its start-up in 1975.

“The operations we’re buying are important to CN because QRC is our second-largest short-line partner, said E. Hunter Harrison, president and CEO. He noted the lines serve important customers at origin and directly feed CN's main-line network.

Pierre Martin, chairman of QRC, said: “We are pleased to have reached agreement with CN on the sale of these three rail subsidiaries and ferry operation. With our close partnership over the years, CN was the logical purchaser of these properties after QRC decided to dispose of key assets. We believe CN will build on our sustained customer focus to deliver even better service in future.”

The properties CN is acquiring include:

Chemin de fer de la Matapédia et du Golfe (CFMG)—FMG has 221 miles of track, interchanging with CN at Rivière-du-Loup, Que. It runs from Rivière-du-Loup, Que., to Campbellton, N.B., where it meets QRC’s New Brunswick East Coast Railway. CFMG also has a line between Mont-Joli and Matane, Que., where a rail ferry operates to the north shore of the St. Lawrence River. CFMG serves major shippers of aluminum, paper and forest products. VIA Rail Canada Inc. uses the line between Rivière-du-Loup and Campbellton for its Maritime service between Montreal and Halifax.

New Brunswick East Coast Railway (NBEC)—The NBEC runs between Campbellton and Pacific Junction near Moncton, N.B. It is 196 miles long and interchanges with CN at Moncton Yard. In tandem with CFMG, the NBEC serves major shippers mainly in the mining and pulp and paper industries. VIA Rail uses the line between Campbellton and Pacific Junction for its Montreal-Halifax service.

Ottawa Central Railway (OCR)—The OCR runs between Coteau, Que., where it interchanges with CN, and Pembroke, Ont. It also serves Hawkesbury, Ont. Between Coteau and Ottawa. The OCR operates over VIA Rail trackage. Major commodities carried by the OCR include newsprint, salt, forest products, steel wire rod and billets.

Compagnie de gestion de Matane Inc. (COGEMA) —COGEMA provides shuttle boat-rail freight service on the St. Lawrence River between Matane and Baie-Comeau, Que., and other ports on the North Shore of the Gulf of St. Lawrence when required. The rail ferry has a capacity of 25 rail cars. CFMG connects with the ferry at Matane and interchanges traffic with CN at Rivière-du-Loup.

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