RailAmerica announced Thursday that it had completed the sale of its three railroad properties in Alberta, Canada to Canadian National Railway Company (CN).
The three properties are the Central Western Railway, ("CWR"), the Lakeland & Waterways Railway ("LWR"), and the Mackenzie Northern Railway ("MKNR"). RailAmerica received cash proceeds of $22.2 million ($26 million CAD). In addition, RailAmerica may receive up to an additional $3.4 million ($4 million CAD) in future payments, depending on the development of new business on the acquired railways.
"We are very pleased with the sale of these railroads. It will enable us to use the proceeds to reduce bank debt and will create financial capacity to acquire railroads that fit our criteria," said Charles Swinburn, Chief Executive Officer of RailAmerica. "We continually review the strategic and economic value of each of our railroads based on these criteria. This sale is a consequence of that continued review."
"While future traffic growth prospects for the railroads are good, taking advantage of them would require significant capital investment." said Donald Redfearn, President of RailAmerica. "We determined that the prospect for using that capital to earn returns that meet our targets are better achieved at other railroads we own. CN will make an investment in these railroads to generate new traffic, and will benefit from the long distance line haul of that traffic. This mutually beneficial transaction is representative of our positive working relationship with CN."
About the Railroads:
The 21-mile CWR owns and operates a switching railway in Central Alberta. The CWR interchanges with CN at Dinosaur (Munson).
The 120-mile LWR operates from Edmonton to Boyle and from Boyle to O'Morrow. The LWR interchanges with CN at the Walker Yard in Edmonton.
The 600-mile MKNR runs north from Smith, Alberta, located about 130 miles north of Edmonton, to Hay River, Northwest Territories. The MKNR interchanges with CN in Smith.
In 2005, the Alberta properties moved approximately 50,000 carloads, generated revenue of $26 million (US) and earnings per share of $0.04. The financial results of the Alberta properties will be reclassified to discontinued operations in RailAmerica's future financial statements.
