11/17/2014 04:25 EST | Updated 01/17/2015 05:59 EST

Norfolk Southern to buy part of northeast U.S. rail line from Canadian Pacific

CALGARY - Canadian Pacific Railway Ltd. (TSX:CP) is selling a stretch of track in the northeastern United States to a major U.S. railway in a US$217-million deal.

Norfolk Southern plans to acquire nearly 455 kilometres of rail line from Delaware & Hudson, a CP subsidiary, between Sunbury, Pa., and Schenectady, N.Y.

The deal is subject to approval by the U.S. Surface Transportation Board.

"Acquiring this portion of the D&H provides for a more efficient rail transportation system by consolidating freight operations with a single carrier," said Wick Moorman, CEO of the Norfolk, Va.,-based railway.

"Aligning the D&H track with Norfolk Southern's 22-state network allows us to connect businesses in central Pennsylvania, upstate New York and New England with domestic and international markets while enhancing the region's competitive rail and surface transportation market."

The two railways say the deal will benefit competition, customers and employment in the northeastern U.S.

Norfolk Southern said it intends to keep its current employees and hire about 150 of the roughly 200 who currently work with D&H in the region.

"Any adversely affected employees will be entitled to standard labour protections," the companies said in a release.

"This acquisition would preserve good-paying railroad jobs and set the stage for economic growth," said John Friedmann, vice-president of strategic planning with Norfolk Southern.

"Absent this transaction and its efficiencies, we are concerned that rail service along much of New York's southern tier would be threatened with losing a crucial link to New England."

Last month, Canadian Pacific confirmed it had approached another big U.S. rail company, CSX Corp., about joining forces, but no deal was reached.

Canadian Pacific CEO Hunter Harrison has been advocating for consolidation in the rail industry as a means to ease congestion and transport goods more efficiently across the continent. He's highlighted Chicago as a particularly troublesome pinch point for North America's rail system.

The lines Norfolk Southern is acquiring would give it single-line routes from Chicago and the southeastern United States to Albany, N.Y., and a new terminal in Mechanicville, N.Y. It would also linkup with track its joint venture subsidiary, Pan Am Southern, operates in New England.

Norfolk Southern also gets a car shop and other facilities through the transaction.

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