WASHINGTON — Canadian National’s proposed acquisition of the 218-mile Iowa Northern Railway will boost rail competition, divert freight off the highway, and give Iowa shippers broader access to single-line service, CN says in a merger application filed this week with the Surface Transportation Board.
CN spent $230 million to acquire the Class III railroad from Cables & Ives, LLC, which wholly owns Iowa Northern, from Sabin Group Holdings, L.L.C., and TCFII IANR SPE LLC. The deal was announced on Dec. 6; the 262-page minor merger application appeared on the STB website today.
Under CN’s proposed merger review timetable, the STB would issue a decision by July 26, with final approval effective on Aug. 25. The STB may adopt its own schedule, but the board must approve minor transactions unless it finds a deal would harm competition.
CN says the acquisition would be pro-competitive because it would offer shippers single-line access to its 18,600-mile network that reaches the Atlantic, Pacific, and Gulf Coasts. CN has vowed to preserve Iowa Northern’s existing interchanges on commercially reasonable terms, and says the transaction would preserve shippers’ existing rail service options. Besides CN, Iowa Northern interchanges with Union Pacific, Canadian Pacific Kansas City, and the Cedar Rapids & Iowa City Railway Co., commonly known as the CRANDIC.
An analysis by Oliver Wyman consultant David Hunt found that the transaction will result in the diversion of 10,503 rail carloads from other railroads to a CN-Iowa Northern routing, and that 14,619 truck shipments would be diverted to the combined railroad. That translates into 2,762 rail carloads and 5,576 containers.
Truck-hauled commodities that could be diverted off the roads include agriculture and food products, chemicals, lumber, machinery, and transportation equipment.
Iowa Northern serves two major ethanol plants and sits in the heart of the state’s ethanol production area. That meshes well with commercial opportunities on the CN network.
“CN is a key player in the rapidly developing renewable fuels market in North America,” Sandra Ellis, CN’s vice president-bulk, wrote in the merger filing. “CN is the only railroad that directly serves the refining hubs in Western and Eastern Canada, the U.S. Gulf Coast, and the U.S. Midwest. CN transports seed to oilseed crush plants, vegetable oil and other feedstocks to refineries, and renewable fuels to end markets. CN’s extensive rail network allows customers producing ethanol and building additional oilseed processing capacity to extend their single-line reach into the rapidly expanding renewable fuels markets.”
CN serves refineries in Canada and the U.S. that include vegetable oils like soybean oil as part of their feedstock mix. CN also directly serves renewable fuels processors in the Louisiana that include vegetable oils as their preferred feedstocks.
“Additional facilities and capacity expansion projects are expected to be announced on the CN network in Canada and the United States in the coming years, leading to more demand for Iowa Northern feedstocks,” Ellis wrote.
Two ethanol opportunities, she said, include export via the Port of Prince Rupert, British Columbia, and delivery to a new fuel distribution facility at CN’s MacMillan Yard outside Toronto.
Iowa Northern’s principal route runs from Cedar Rapids to Manly, Iowa. Iowa Northern’s Garner Subdivision extends between Forest City and Belmond, and it also has a branch line to Oelwein. CN connects to Iowa Northern at Waterloo and Cedar Rapids. In all, the railway serves more than 100 customers and handles 60,000 cars annually — nearly half of which were interchanged with CN in 2022.
In separate regulatory filings, CN’s Chicago, Central & Pacific Railroad and Iowa Northern have proposed trackage rights deals that would give the combined CN-Iowa Northern operational flexibility by allowing the railroads to operate trains with their own crews over each other’s track in Iowa.
CN plans to expand Iowa Northern’s unionized workforce and will pay current employees retention bonuses to stay on through next year.
IANR will be held in an independent trust until the STB’s merger review is complete. Ron Batory, the former administrator of the Federal Railroad Administration, is the trustee.
