Genesee & Wyoming to buy western portion of DM&E

Washington (Platts)--2Jan2014/554 pm EST/2254 GMT


Genesee & Wyoming, the US' largest short line railroad holding company, will purchase the western portion of the Dakota, Minnesota and Eastern railroad from Canadian Pacific for $210 million, the companies said Thursday.

The purchase includes 660 miles of the DM&E line between Tracy, Minnesota and Rapid City, South Dakota, but will not include the previously-approved rights to extend the railroad into the Powder River Basin.

Michael Williams, spokesman for the Darien, Connecticut-based G&W, said CP has retained the rights for the PRB extension.

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Calgary-based CP will also retain ownership of the remaining 1,900 miles of the DM&E line east of Tracy.

The US Surface Transportation Board approved the DM&E's proposed 260-mile PRB extension in 2002, but it was never built. The extension was envisioned to compete with BNSF Railway and Union Pacific, the only two railroads that serve the country's most productive coal basin.

The proposed DM&E expansion was projected to handle 100 million st annually.

CP purchased the DM&E in 2007 for $1.48 billion. The acquisition was approved by the STB in 2008.

In December 2012, CP said it planned to sell the DM&E line and would indefinitely postpone plans to build the PRB extension, citing a continued deterioration in the market for domestic thermal coal.

G&W's acquisition is subject to approval by the STB but the company said it expects the sale to close by mid-2014.

--Andrew Moore, andrew.moore@platts.com
--Edited by Katharine Fraser, katharine.fraser@platts.com

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