CN to buy U.S. Steel’s Chicago line

Canadian National Railway (CN) expects to improve its traffic flow at Chicago by buying a local short rail line company from U.S. Steel for US$300 million.

Pending approval by U.S. transport regulators, a deal for CN to buy the Elgin, Joliet and Eastern Railway Co. (EJ&E) is expected to close in mid-2008, the two companies announced today.

EJ&E is a Class II railroad with 198 mainline miles of track encircling Chicago from Waukegan in the north through to Joliet, Ill., Gary, Ind., and South Chicago. CN said the line will “improve the fluidity” of its operations by allowing its through traffic to bypass the city, and fill the “missing link” between CN’s eastern, western and southern rail networks.

“Chicago is essential to CN’s rail operations, yet it presents us with major operational challenges,” CN’s CEO E. Hunter Harrison said in a release. “This transaction will improve rail operations on the CN system and the rest of the Chicago rail network by moving CN trains out of the urban core to EJ&E lines on the outskirts of the Chicago metropolitan area.”

U.S. Steel will keep the track, equipment and rail line staff that support the company’s Gary Works site in northwestern Indiana and the company’s steelmaking operations. Those assets will move to U.S. Steel’s Transtar subsidiary and become the Gary Railway.

CN said it would spend about US$100 million on integration, new connections and improvements to add capacity on the EJ&E line. Streamlining operations and cutting down congestion would benefit both lines’ customers as well as residents of Chicago and nearby communities, Harrison said.