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SD-CanadianPacific-D 10-13

Canadian Pacific-DM&E deal now in federal board’s hands

Associated Press

SIOUX FALLS, S.D. — Canadian Pacific Railway has completed its acquisition of the Dakota, Minnesota & Eastern Railroad, so the plan is now under review by the U.S. Surface Transportation Board.

It could take more than six months for the STB to sign off on the deal, said Kevin Schieffer, chief executive officer of the Sioux Falls-based DM&E.

Wall Street railroad analyst Anthony Hatch said he expects the STB to find no major problems with the merger, since it would give South Dakota shippers access to another Class I railroad.

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"I can’t really see what could trip this up," Hatch said. "This is a deal that will be passed eventually. It’s just a question of when."

Canadian Pacific announced in September that it would pay $1.48 billion cash for the DM&E and its subsidiaries. If CP follows through on the DM&E’s long-planned expansion project to carry coal from the Powder River Basin of Wyoming, the deal could cost CP an additional $1 billion.

DM&E has wanted to rebuild 600 miles of track across South Dakota and Minnesota and add 260 miles of track around the southern end of the Black Hills to the Wyoming coal fields.

The rebuilt railroad would haul low-sulfur coal east to power plants, allowing CP to compete with Union Pacific and BNSF Railway, which combined to carry about 450 million tons of coal from the basin last year.

Some of the most vocal opponents of the coal project have been in Rochester, Minn., because of concerns about its potential impact on the Mayo Clinic.

Dennis Hanson, president of the Rochester City Council, said members of the Rochester Coalition would like to talk to CP officials about a bypass or another option to using the current track.

"I think we would like to open communication as soon as we can for the simple fact we would like to get started on the right foot," he said.

"We stubbed our toe the last time" in trying to negotiate with Schieffer. "We would like to come out of the gate prepared to sit and talk, versus pointing fingers."

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DM&E stock has gone into trust until the STB decides on the acquisition.

Richard Hamlin, a private consultant who built a 30-year career as a transportation executive, has been appointed trustee. If the STB approves the deal, control of the DM&E stock would shift to Canadian Pacific.

The DM&E and CP will operate independently in the interim.

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