CP Rail to buy DM&E for at least $1.48 billion
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Wed, 05 Sep 2007 05:30:05 GMT |
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NEW YORK (Reuters) - Canadian Pacific Railway Ltd said it planned to buy the Dakota, Minnesota & Eastern Railroad Corp for at least $1.48 billion to expand its network and increase its access to U.S. Midwest markets.Canada's No. 2 railway will expand by about 2,500 miles of track in acquiring DM&E, the largest U.S. regional railroad, CP Rail said late on Tuesday.Calgary, Alberta-based CP Rail, which expects the deal to close in the next 30 to 60 days, said the deal for the private company consisted of a $1.48 billion cash payment upon closing and future contingent payments of up to about $1 billion."The DM&E is a high-quality, growing regional railroad that complements our existing franchise," CP Rail Chief Executive Fred Green said in a statement. "This investment presents the opportunity for future growth through further expansion of our network and is accretive to our EPS in 2008."The deal for Sioux Falls, South Dakota-based DM&E comes after CP Rail said in July it had rejected an "inquiry" by Brookfield Asset Management and denied it was in takeover talks.DM&E, which serves eight states, has been pursuing a strategy to become the third rail carrier in Wyoming's Powder River Basin, North America's largest and most rapidly growing source of low-cost, low-sulphur coal, CP Rail said.Payments of $350 million will become due if construction starts on the Powder River Basin expansion project before the end of 2025.Further payments of as much as about $700 million will be due upon movement of specified volumes of coal from the Powder River Basin over the Powder River Basin extension before the end of 2025.CP Rail confirmed its 2007 earnings per share outlook, excluding foreign exchange gains and losses on long-term debt and other specified items, remained unchanged in the range of C$4.30 to C$4.45.In connection with the deal, CP Rail said it had suspended activity under its current share repurchase program that began in March.
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