CN will seek legal relief to conclude its proposed EJ&E acquisition

    CN remains committed to purchasing railroad arc around Chicago to ease

    CHICAGO, IL, Aug. 6 /CNW Telbec/ - CN (TSX:CNR) (NYSE:  CNI) said today
that it will be seeking legal relief in order to permit the company to close
on its proposed acquisition of the major portion of the Elgin, Joliet &
Eastern Railway Company (EJ&E). Relief will be required now that the Surface
Transportation Board (STB) has declined CN's request for a fixed timetable
that would conclude its regulatory review by the end of the year, and the
seller, United States Steel Corporation (U. S. Steel), has informed CN that it
will not extend the Stock Purchase Agreement (SPA) for the transaction beyond
December 31, 2008.
    "Given the significant uncertainty on the date for completion of our
proceeding after issuance of the STB's time limits decision, and the fact that
U. S. Steel has read the SPA to require that this transaction close by
December 31, 2008, CN contacted U. S. Steel last week to formally request an
extension of the deadline," said E. Hunter Harrison, President and Chief
Executive Officer of CN. "U. S. Steel is prepared to cooperate with CN towards
the goal of closing the transaction in 2008, but it will not agree to extend
the SPA. Therefore, we need a decision in this case, and we have decided to
seek legal relief to allow CN to close on the transaction prior to
December 31, 2008."
    Harrison noted that CN asked the STB in May 2008 for time limits for the
STB's regulatory review and for issuance of a final decision on this
transaction consistent with the terms of CN's SPA with U. S. Steel.
    In response, the STB established a 60-day timetable for interested
parties to submit comments on the Draft Environmental Impact Statement (DEIS).
The STB's decision projected issuance of the final EIS between December 1,
2008 and January 31, 2009, with a final decision on the transaction to be
served as soon as possible thereafter, pursuant to Council on Environmental
Quality regulations. As a result, the STB's final decision could be served
during the December 1, 2008 to March 2, 2009 time frame, with the STB's final
decision becoming effective then or later. The STB also reserved the right to
adjust this schedule as necessary.
    CN will provide more detail in the near future on the legal relief it
will be seeking to ensure that this transaction is allowed to close in the
public interest. In the meantime, CN will continue to work with affected
communities along the EJ&E line in an effort to reach voluntary mitigation
agreements addressing environmental concerns associated with increased train
traffic on the EJ&E line. CN also has been actively engaged in the
environmental review process undertaken by the STB's Section of Environmental
Analysis (SEA) and will be participating in the public hearings that will be
conducted by SEA in communities in the region in August and September.
    "The public interest calls for the STB to complete its review of the
transaction and, should it be approved, to serve a decision that would allow
the transaction to close by the end of the year," Harrison said. "This
transaction would not simply benefit CN and its customers - this transaction
is in the broader regional and national interest. A more efficient rail system
benefits businesses that rely on freight rail transportation and is an
important component in the competitiveness of Chicago as a critical rail hub
for the United States.
    "Shifting CN's trains to the underutilized EJ&E line would bring benefits
for millions of residents in downtown Chicago while also streamlining rail
operations. For every community along the EJ&E line that would see increased
train traffic as a result of this transaction, nearly double that number along
other rail lines would experience a traffic decrease. CN recognizes the
concerns of the communities along the EJ&E line about increased train traffic,
and we have been working for the past several months with community leaders on
appropriate mitigation measures for reducing adverse impacts."
    CN and U. S. Steel announced on September 26, 2007, an agreement under
which CN would acquire most of the EJ&E for $300 million, subject to
regulatory approval by the STB. The transaction would enable CN to re-route
its trains along the EJ&E arc around the periphery of the Chicago area,
generating broad public benefits by reducing rail congestion in the inner core
of Chicago while significantly improving the flow of CN's rail operations in
the Chicago region. The transaction would also provide a head start for the
Chicago Region Environmental Transportation Efficiency Program (CREATE), with
CN committing an additional $100 million for integration, new connections, and
infrastructure improvements to add capacity on the EJ&E line and allow network
synergies to be realized over time. This $400 million of private-sector
investment, combined with the roughly $40 million that CN would expect to
spend to mitigate the impacts of increased train traffic along the EJ&E line,
would better utilize and enhance capacity on the Chicago-area rail network.
    On November 26, 2007, the STB designated the transaction as a "minor" one
because the application did not pose anti-competitive issues. Under current
law, the STB is required to issue a final decision on "minor" transactions
within 180 days after accepting the application for consideration. In its
November decision, however, the STB also announced that it would prepare an
Environmental Impact Statement (EIS) on the transaction and that issuance of a
final decision would be extended beyond the 180 days until the completion of
the EIS. SEA began its extensive environmental review of this transaction in
December 2007.
    More information on the transaction, including a map of the areas served
by the EJ&E and CN, is available by clicking on the EJ&E Acquisition icon on
the About CN section of its website

    Forward-Looking Statements

    This news release contains forward-looking statements. CN cautions that,
by their nature, forward-looking statements involve risk, uncertainties and
assumptions. In addition to the other assumptions contained in this release,
the Company believes the U.S. economy is currently experiencing recessionary
conditions, but assumes that it will recover within the next six to nine
months, and that the global economy will grow at a moderate pace throughout
this period. The Company cautions that these assumptions may not materialize.
The Company's results could differ materially from those expressed or implied
in such forward-looking statements. Important factors that could cause such
differences include, but are not limited to, industry competition, legislative
and/or regulatory developments, compliance with environmental laws and
regulations, various events which could disrupt operations, including natural
events such as severe weather, droughts, floods and earthquakes, the effects
of adverse general economic and business conditions, inflation, currency
fluctuations, changes in fuel prices, labor disruptions, environmental claims,
investigations or proceedings, other types of claims and litigation, and other
risks detailed from time to time in reports filed by CN with securities
regulators in Canada and the United States. Reference should be made to CN's
most recent Form 40-F filed with the United States Securities and Exchange
Commission, its Annual Information Form filed with the Canadian securities
regulators, and its 2007 Annual Consolidated Financial Statements and Notes
thereto and Management's Discussion and Analysis (MD&A), as well as its 2008
quarterly consolidated financial statements and MD&A, for a summary of major
    CN assumes no obligation to update or revise forward-looking statements
to reflect future events, changes in circumstances, or changes in beliefs,
unless required by applicable laws. In the event CN does update any
forward-looking statement, no inference should be made that CN will make
additional updates with respect to that statement, related matters, or any
other forward-looking statement.

    CN - Canadian National Railway Company and its operating railway
subsidiaries - spans Canada and mid-America, from the Atlantic and Pacific
oceans to the Gulf of Mexico, serving the ports of Vancouver, Prince Rupert,
B.C., Montreal, Halifax, New Orleans, and Mobile, Ala., and the key
metropolitan areas of Toronto, Buffalo, Chicago, Detroit, Duluth,
Minn./Superior, Wis., Green Bay, Wis., Minneapolis/St. Paul, Memphis, and
Jackson, Miss., with connections to all points in North America. For more
information on CN, visit the company's website at

For further information:

For further information: Karen Phillips (Media), Vice-President, North
American Government Affairs, CN, (202) 347-7196; Robert Noorigian (Investors),
Vice-President, Investor Relations, CN, (514) 399-0052

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