CN Rail has won approval for a multibillion-dollar deal that will provide it direct access to ports on the Gulf of Mexico.
The United States Surface Transportation Board last week gave a unanimous go-ahead to CN’s purchase of Illinois Central Corp., which serves the U.S. Midwest and has track running south to New Orleans.
“All the signals are green,” said CN spokesperson Mark Hallman.
Under the terms of the March 27 decision, CN will be permitted to exercise control over IC’s operations and assets as of June 24. Hallman said a step-by-step integration of the two railroads is expected to begin July 1.
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CN president Paul Tellier said the railway was “extremely gratified” by the ruling.
“The merger holds the promise of improved customer service, new opportunities for employees, a stronger, more durable CN and better value for shareholders,” he said in a news release.
CN said the merger will provide benefits for grain shippers in both Canada and the U.S.
It will eliminate the need for costly and time-consuming interchanges and switches between the two railways at Chicago, making for more efficient use of equipment and reduced car cycle times.
It will give Canadian grain producers single-line access to the U.S. Midwest, meaning more efficient service to traditional customers in places like Nebraska, Iowa and Illinois, and provide access to new markets such as large poultry producers in places like Mississippi or Tennessee.
The access to New Orleans will provide new opportunities to ship special crops like peas and lentils to customers in the Caribbean, Central and South America and Africa, and to ship wheat, malting barley and vegetable oils to Mexico via the Gulf of Mexico.
Analysts say it will also allow for more return traffic from the U.S., such as soymeal to service the livestock industries in Manitoba and Saskatchewan.
In its decision, the transport board also approved a 15-year marketing alliance signed last year between CN, IC and the Kansas City Southern Railway, providing direct links to Mexico’s largest rail system serving Mexico City and Mexican ports on the Pacific Ocean and Gulf of Mexico.
Under the terms of the deal, CN is spending $2.4 billion (U.S.) to acquire the assets of IC. The total transaction, including IC’s debt, is about $3 billion.
