Allied Securities Corporation Tracks Sale By Canadian Pacific Railways Ltd.
Allied Securities Corporation is following the sale by Canadian Pacific Railways Ltd of $210 million worth of rail track to Genesee & Wyoming Inc.
New York, New York, June 12, 2015 (Newswire.com) - In a move that surprised absolutely no one involved in the rail industry in the U.S, Canadian Pacific Railways Ltd sold of the western portion, some 660 miles, of its Dakota, Minnesota & Eastern line to Genesee & Wyoming Inc for $210 million. The track was purchased by Canadian Pacific in 2008 as part of a plan to help increase their coal freight business.
The 2008 purchase of the DME line for $1.48 billion had been viciously opposed from the onset by the rail operators largest investor Pershing Square Capital Management’s William Ackman who had described the purchase as a blunder but was unable to prevent the sale from going ahead. Following the purchase he successfully lobbied to have Canadian Pacific’s CEO Fred Green replaced with current CEO Hunter Harrison and was the driving force behind a 13 month long strategic review which recommended selling off the western portion of the line.
“This was a contentious purchase back in 2008 with Canadian Pacific severely divided over it, one side believing that it would increase revenue from coal carrying orders and others seeing the slump in coal that the Obama administration would ultimately engineer. Now G&W believes that given current conditions it could add $65 million a year to their business” outlined Sebastian Howe, Senior Fund Manager at Allied Securities Corporation.
As more reliance is now being placed on cheaper natural gas than coal, many analysts are looking deeper into the strategic implications of G&W’s purchase especially in light of developments with the Keystone XL project and what effect would be experienced by rail operators in regards to pipeline environmental concerns that have been a media heavy topic over the last 12 months.
“This is not an easy deal to judge, not at all. Both companies right now are sure to have people making the what if arguments on a constant basis, have we bought the right portion, did we hold the position for too short a time and so on. Ultimately we’re going to need far more solid indicators on the U.S energy market for the coming years to make an accurate call” ended Sebastian Howe of Allied Securities Corporation.