Calgary Alberta - At first glance, it looks like one of the strangest business deals of the year.
 
Last week, Canadian Pacific Railway (CP) announced that it had purchased the Central Maine & Quebec Railway (CMQ) from its American owner, a company called Fortress Transportation and Infrastructure Investors LLC, for US$130 million.
 
CMQ owns 774 kilometres of rail lines in Quebec and Maine, including the stretch at Lake Megantic where a runaway train loaded with crude oil exploded in the centre of the small town in 2013, killing 47 people.
 
At the time, it was called the Montreal Maine & Atlantic Railway (MMA).
 
What's even stranger is that CP used to own the same railway, part of the main line that connected the company's transcontinental network to the Atlantic Coast.
 
Built in the late 19th century, it linked Montreal to Saint John, New Brunswick, by the shortest path, cutting across northern Maine.
 
But by the early 1990s, business had dried up and CP tallied up big losses on the line and got regulatory approval to abandon it, including the possibility of ripping it up.
 
In the end, CP sold the line in 1994.
 
Since then, the tiny railway has had three owners, two of whom subsequently went bankrupt.
 
Business on the line still appears to be pretty sleepy and its infrastructure shaky.
 
The railway hauls forest products, chemicals, and some refined fuels.
 
Cargo traffic improved a bit in 2018 but was still lower than in 2016.
 
And despite capital investments, Transport Canada (TC) had to order the railway in September to make urgent repairs on 253 defective rails.
 
There have also been two recent derailments on the line in Quebec.
 
So why in the world would CP want to get back into a business it was so anxious to dump 25 years ago?
 
The answer appears to be that CP now sees big opportunities in using the line to become a true transcontinental railway again by giving it a new link to the Port of Saint John, currently undergoing a $205 million expansion of its container capacity.
 
"This acquisition preserves and strengthens competition, giving CP a true coast-to-coast network across Canada and increased presence in the eastern U.S.," CP said in an email response to questions.
 
"With increased port access, more dots on the map, and our proven precision scheduled railroading operating model, we are confident this transaction will bring benefits to all stakeholders moving forward."
 
Right now, rival CN has a lock on traffic from Atlantic coast ports, particularly Halifax, and containers from Saint John also are shipped up to Moncton and then onto the CN main line heading west.
 
The Port of Saint John links to CMQ through an Irving owned branch line, which would give shippers a CP alternative for containers and other cargo heading to central Canada and the U.S.
 
There's another link to the harbour at Searsport, Maine.
 
Cameron Doerkson, an analyst at National Bank Financial, says that CP is betting that it can improve operations and drive more volume along the railway.
 
And he says the purchase reflects a belief that world trading patterns may be changing.
 
While it makes sense to move containers to North America through West Coast ports if they're coming from China, if manufacturing moves to India and Vietnam, the shortest sailing distance to North America ends up being through the Suez Canal.
 
That makes East Coast ports a lot more desirable, Doerkson said.
 
And nobody is building new rail lines.
 
It's simply too expensive and too time consuming.
 
If you think people oppose pipelines that are eventually buried, imagine the reaction if a whole new rail line were proposed, anywhere.
 
In the case of CMQ, plans are going ahead for a 12.8 kilometre bypass around the centre of Lake Megantic, financed jointly by Ottawa and the Quebec government.
 
The bypass, a direct result of the 2013 disaster, is in the process of getting environmental approvals and Ottawa is negotiating land purchases.
 
But construction isn't expected to begin until 2021, with completion in 2023.
 
And the cost will be $130 million.
 
About the same as CP is paying for the whole railway.
 
DP World, the Dubai-based company that operates marine terminals in 50 countries, signed a 30 year lease to run the West Side container terminal at Saint John in 2017.
 
Curtis Doiron, the terminal's general manager, welcomed the CP acquisition.
 
"I see it as an opportunity to increase service through the port."
 
Even the mayor of Lake Megantic is optimistic.
 
Understandably, residents have ambivalent feelings toward the railway, which was the cause of so much human and material devastation only six years ago.
 
Yet the railway remains the lifeblood of the community.
 
Lake Megantic's largest employer, a maker of particle board with 350 workers, depends on the railway for its operations.
 
"Our economy is based on the railway and our industries need the train," she said in an interview.
 
"Our industrial park is one of the only ones in Quebec to have service five days a week."
 
What she's hoping for is that CP will also have the financial capacity and the systems in place to invest in the railway and make sure that safety remains the priority.
 
Since the accident in 2013, no crude has passed along the line.
 
And that doesn't seem likely to change any time soon.
 
When asked about whether CP sees the railway as a future route for crude from Western Canada and North Dakota to Saint John, a CP spokesman quoted from a presentation made by CMQ to a recent Quebec environmental hearing, noting that "it does not currently have a plan to transport crude oil and does not anticipate that this will change."
 
As for U.S.-based Fortress, it seems as if its investment in CMQ has paid off.
 
It bought the line out of bankruptcy in 2014 for $17.3 million and is selling it to CP for 7.5 times more, $130 million.
 
Not bad.
 
Alan Freeman.