DM&E will be sold to Canadian Pacific

Mayo Clinic has opposed the railroad's plan to run coal shipments through Rochester.

By Staff and Wire Reports

Last update: September 5, 2007 - 12:17 AM

The Dakota, Minnesota & Eastern Railroad, whose $6 billion plan to ship coal from Wyoming across southern Minnesota was met with stiff opposition, agreed Tuesday to be sold to Canadian Pacific Railway Ltd. for $1.48 billion.

The DM&E, based in Sioux Falls, S.D., has been trying to build 280 miles of new line and rebuild 600 miles of existing line to allow high-speed shipments of coal from Wyoming's Powder River Basin across South Dakota and southern Minnesota.

The plan, while supported by Minnesota farm groups, was staunchly opposed by the Mayo Clinic and others in Rochester who said the increased train traffic through that city posed a safety hazard.

In February, the Federal Railroad Administration turned down the DM&E's application for a $2.3 billion loan for the project, questioning the DM&E's ability to repay the loan.

But Canadian Pacific, with 2006 freight revenue of $4.4 billion (Canadian) compared with DM&E's $258 million (U.S.), is on a whole different financial playing field.

"Canadian Pacific is excited about the prospect for growth in the coal-rich Powder River Basin," Fred Green, Canadian Pacific's chief executive, said in a prepared statement.

In addition to the $1.48 billion purchase price, Canadian Pacific could pay future contingent payments of up to $1 billion -- $350 million if construction starts on the Powder River Basin expansion project by 2025, and about $700 million upon the movement of specified volumes of coal from the basin by the same time.

The deal is expected to close in the next 30 to 60 days, the companies said.

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