EJ&E buyer will meet with Metra
With Canadian National Railway agreeing to buy much of the Chicago area's EJ&E railroad Wednesday, Metra's much-anticipated STAR Line project linking the Northwest and West suburbs appears vulnerable..
Yet, CN and Metra officials say they plan to meet soon to go over how the new line could run on or alongside the EJ&E tracks between Joliet and Elgin.
Meanwhile, CN officials say no major layoffs are planned for the EJ&E's 700 employees in a deal that should noticeably improve their service through the congested Chicago rail system.
Metra's first suburb-to-suburb line is supposed to run down the Northwest Tollway, I-90, to Elgin and then turn south to Joliet via the EJ&E tracks.
The $1.25 billion project is in the planning stages and could be online within a decade.
"We are aware of the STAR Line plan because we read the papers like everyone else," said CN spokesman Jim Kvedaras. "But we don't have a clear understanding of what it will mean for our operations."
CN and Metra have recently worked together on the expansion of the North Central Line service between Antioch and Chicago.
Metra spokeswoman Judy Pardonnet said the agency had no written agreement with EJ&E on the use of its tracks for the STAR Line.
"It is just way too premature," to talk about CN's impact on the STAR Line, she said.
On Wednesday, CN agreed to pay $300 million to purchase the bulk of the EJ&E from United States Steel Corp.
CN Rail has been praised by analysts as one of North America's most efficient railways, but it has long acknowledged that Chicago is a weak point where congested switching operations between its main lines slows freight traffic to a crawl.
"With the congestion in Chicago, we can get from Winnipeg (Manitoba) to Chicago faster than we get from north Chicago to south Chicago," said CN CEO Hunter Harrison. "So this can have a substantial impact on transit times."
The tracks of the 198-mile EJ&E run around the outskirts of Chicago and connect with all of CN's major lines running into the city. CN plans to invest $100 million to upgrade sections of the EJ&E.
Analysts generally praised the deal.
"Price is probably fair if synergies are realized," Morgan Stanley Research said in an analysts note.
Harrison said the deal should not lead to major layoffs and CN was committed to giving any dislocated workers other jobs within the company.
The deal comes three weeks after Canadian Pacific announced it would buy the Dakota, Minnesota & Eastern Railroad for $1.5 billion in Canadian dollars, a deal that also increases CP's access to Chicago.
Montreal-based Canadian National now operates about 20,300 route miles in eight Canadian provinces and 16 U.S. states.
CN officials hope the deal, which will be financed with debt and cash on hand, will close by mid-2008. The takeover requires U.S. regulatory approval.