RLBA Assists in Canadian Pacific Sale of DM&E to Genesee and Wyoming

Canadian Pacific, Ltd. (CP) engaged RLBA in 2013 to perform select, detailed studies in support of its then recently-announced sale of the former Dakota, Minnesota & Eastern (DM&E) “West End.”

RLBA’s Staff, under the leadership of John McLaughlin and Charlie Banks, performed a study to assist potential buyers in understanding costs and cost drivers associated with operating the West End as a 660 mile-long shortline railroad as opposed to a piece of a 14,000 mile-long Class I.

The five areas of study included: 1) determining the capital and maintenance costs associated with track infrastructure and equipment over the next decade, assuming current traffic levels; 2) ascertaining the number of mechanical, engineering and operating employees needed to operate the West End as a shortline railroad; 3) estimating the number of locomotives necessary to haul traffic of the West End as an isolated short line; 4) analyzing and forecasting trends in grain volumes by type and 5) opining as to management changes that could be employed to make the operation more efficient if performed by a third party purchaser.

In support of those five tasks, RLBA undertook an on-site inspection of nearly the entire DM&E West End, performed analysis of train size and routing, and employed available historical data concerning grain flows, species and climate to determine trends in future agriculture volumes by commodity. The final deliverable to CP, an investment-quality written report, was provided to interested buyers, one of whom, Genesee & Wyoming, Inc., is the company that has ultimately won the contract to acquire the 660 mile-long railroad for $210 million.