CPR deal expected to pass, despite Mayo
Published: November 8, 2007
Source: BRENT JANG, Globe & Mail
Canadian Pacific Railway Ltd.'s plan to
haul coal in the U.S. Midwest is supported by 55 of 56 American cities
along the rail route, leaving Rochester, Minn. - home to the Mayo Clinic
- with at best a long-shot chance of spoiling CPR's party, says a
research report by National Bank Financial Inc.
Analyst David Newman predicted yesterday that CPR will eventually win
U.S. regulatory approval to buy Dakota Minnesota & Eastern Railroad
Corp. for $1.5-billion (U.S.), albeit after a lengthy wait until
October, 2008, to get the green light.
Calgary-based CPR's main fight is against the Mayo Clinic and the
Rochester Coalition, a local group of business and government leaders
battling to keep the little-used DM&E tracks from becoming a major route
for high-speed trains carrying coal from the Powder River Basin in
"CPR will only have to contend with political pressure, in our view, led
by the Mayo Clinic," Mr. Newman wrote in his 36-page report. "The world
renowned Mayo Clinic employs 28,000 people, has more than 1,500 beds and
is a medical hub and economic engine in the upper Midwest."
The U.S. Surface Transportation Board's rejection of CPR's request for
fast-track approval of its purchase of DM&E, the largest regional
railway in the United States, places the deal in regulatory limbo for
nearly a year.
When CPR closed its DM&E deal last month, it appointed U.S.
transportation consultant Richard Hamlin to be the trustee during the
regulatory review process. Mr. Hamlin heads an independent voting trust
that has been created so that the Canadian carrier doesn't exercise
control over DM&E, pending the regulator making its decision.
The Mayo Clinic warned recently in regulatory filings that it could
become the target of terrorists who would exploit the hospital's
location near the train tracks.
But Mr. Newman expressed optimism that CPR will find a compromise to
prevent the Mayo Clinic from halting long-term plans for a flurry of new
coal shipments heading east to coal-fired power plants.
"While the Mayo Clinic is raising safety concerns about the railroad, we
would note that CPR could readily address any safety challenge," he
CPR prides itself "on being a very safe railroad, and its acquisition of
DM&E should improve safety significantly."
Mayo Clinic officials say that the hospital's founder, William Worrall
Mayo, founded his private medical practice in 1863, a year before the
train tracks reached Rochester.
"There are arguments about who built first," Mr. Newman said. CPR's
supporters note that it wasn't until the 1880s that Dr. Mayo's two sons
joined his practice, which led to the creation of the Mayo Clinic.
Other critics that have filed complaints to the regulatory board include
the City of Winona, Minn., and rail rival Burlington Northern Santa Fe
Corp. of Fort Worth, Tex.
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