CN expands its central US reach

Canadian National has agreed to purchase the agricultural Iowa Northern Railway.

By Andrew Joseph, Editor

With rival railroad company Canadian Pacific Kansas City (CPKC) valued at $104 billion market cap and pocket change, the Canadian National Railway (CN), valued at $107.1 billion market cap, is always looking at ways for it to maintain its Big Brother status.

In March 2023, Canadian Pacific purchased the US railroad Kansas City Southern and its Mexico subsidiary operations for US $31 billion. On April 14, 2023, it became the first and only railroad to directly serve Canada, Mexico, and the United States, working primarily along the North American west coast.

This provided the Canadian Pacific with a considerable advantage over its Canadian National rival, as the acquisition and subsequent merger made it easier for Canadian grain et al. to be transported along the Gulf Coast into the US and Mexico.

Never poke a bear: poke-a-poke-a-poke-a. To resolve the fact that Canadian Pacific has a triple punch system in place for the ag network, CN joined forces with two other railroads: Union Pacific of the US and Grupo Mexico of Mexico, to form Falcon Premium intermodal service.

Operating from Mexico, it will enter the US via Eagle Pass, Texas, and then follow a central eastern route through Chicago and Detroit. From Detroit, it will enter Canada and head east towards Toronto, Montreal, and Moncton before terminating in Halifax. Via Chicago, Falcon Premium will enter Canada into Winnipeg, Regina, Saskatoon, Edmonton (and a spur line off-shooting to Calgary), and into BC, where it splits into two lines—to a Vancouver hub and one farther north in Prince George.

The Canadian National Falcon Premium intermodal network has lines in Mexico, the US, and the eastern and western areas of Canada. However, its US presence has been mainly limited to central and eastern US rail lines.

Excluding the Falcon Premium partnership, CN connects Canada’s eastern and western coasts with the US south via an 18,600-mile rail network.

Looking for more business within the US, CN grabbed a larger slice of the central US pie with the agreement to purchase the Iowa Northern Railway (IANR) Company. The railroad is headquartered in Waterloo, Iowa. Along with Waterloo, it has offices, repair and maintenance shops, and yard facilities in Manly, Iowa.

This company is an independent 440-track kilometre (~275 track miles) Class III short line led by the Sabin family. The IANR rails connect with Canadian National’s US rail network, Union Pacific routes, and routes used by the CPKC.

Shall we assume that everyone will play nice and share the rails equally?

The IANR will be transferred to an independent voting trust pending a regulatory review of the transaction by the US Surface Transportation Board; a decision is expected in 2024.

The transaction was closed into an independent voting trust pending regulatory review by the US Surface Transportation Board (STB).

For CN, the IANR is well-regarded as one of the country’s premier and fastest-growing independent shortline railroads. The Iowa (IA as a state abbreviation) Northern Railway serves the upper US Midwest agricultural and industrial markets, with traffic including biofuels and grain.

CN called the purchase “a meaningful opportunity to support the growth of local business by creating single-line service to North American destinations while preserving access to existing carrier options.”

Daniel Sabin, the Chairman of the IANR, added that “We believe CN shares IANR’s commitment to local stakeholders and that this transaction will be beneficial for customers, employees, and the local Iowa economy.”

Sabin continued: “We are confident that, as part of CN, IANR will be able to continue to provide reliable first- and last-mile service to our local customers while providing them access to a much broader network and market.”

Tracy Robinson, President and Chief Executive Officer at CN, was more than happy to welcome IANR into her company’s fold.

“We are delighted to have reached an agreement with Iowa Northern Railway. We look forward to the opportunities our combined network will provide customers, farmers, and our partners to respond to the needs of their existing and new markets,” she explained. “By enabling all of us to play an even more important role in this critical supply chain and densifying our southern network, we are accelerating sustainable, profitable growth.”

The financial costs and terms of the Iowa Northern Railway transaction were not disclosed.

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