NEW YORK (TheStreet) Railroad operator Canadian Pacific Railway (CP) said Thursday, Jan. 2, it had agreed to sell the western part of its Dakota, Minnesota & Eastern line to Genesee & Wyoming (GWR) for $210 million.
The deal comes just over a year after the seller put the asset on the block and follows its 2012 truce with Bill Ackman's Pershing Square Capital Management, which had criticized the 2008 purchase for C$1.48 billion ($1.39 billion) of the line Canadian Pacific is now partially shedding.
Greenwich, Conn.-based Genesee & Wyoming will acquire 660 miles of railroad, which it will rename the Rapid City, Pierre & Eastern Railroad. It expects the acquisition to generate annual revenue of $65 million and boost earnings per share immediately.
The acquisition is its first since it teamed up with Carlyle Group in 2012 to buy RailAmerica in a $3.1 billion deal from shareholders including Fortress Investment Group.
Canadian Pacific, of Calgary, Alberta, said the sale to Genessee will result in a net writedown of $240 million in its 2013 fourth quarter but won't have a material impact on future earnings. It will continue to own and operate 1,900 miles of the former DME line.
Canadian Pacific is led by CEO Hunter Harrison, who was Ackman's choice of leader after his 2012 campaign unseated the company's former chairman and CEO. Harrison put the 660-mile stretch of the DME up for sale in December 2012 just after abandoning an option to build a 260-mile extension of the line, a decision the company blamed on slumping U.S. demand for thermal coal.