Canadian National to acquire Illinois Central

MONTREAL and CHICAGO, Feb. 11 -- Canadian National Railway Company and Illinois Central Corporation announced today that the companies have entered into a definitive merger agreement under which CN will acquire all of the common stock of IC for a combination of cash and stock valued at US$39 per IC share.

"This combination is about growth," said Paul Tellier, President & Chief Executive Officer of CN. "It's a perfect fit of two complementary lines providing a three-coast strategy from the Atlantic to the Pacific to the Gulf of Mexico. A combined CN and IC will create new revenue opportunities, new efficiencies and new avenues for shareholder growth."

IC has approximately 61.4 million shares outstanding, giving the transaction a total equity value of approximately US$2.4 billion. Upon completion of the merger, CN will also assume IC's net debt of approximately US$560 million.

Under the terms of the agreement, which has been approved by both companies' Boards of Directors, CN will promptly commence a cash tender offer for approximately 46.1 million shares of IC common stock, representing approximately 75 percent of the outstanding IC common stock at a price of US $39 per IC share. This represents a premium of 17.8 percent over the US$33.12 average closing price of IC stock for the 30-day calendar day period ended Feb. 9, 1998.

If the merger goes through, CN will become the fifth largest railway in North America, based on 1997 annual revenues. CN will have approximately 18,700 route miles in Canada and the U.S. and 24,600 employees.

"Employees will benefit from being part of a stronger company in a consolidating industry. We expect the combined companies' ability to stimulate revenue growth will create exciting new employment opportunities," Tellier said.

E. Hunter Harrison, President & Chief Executive Officer of IC, said, "We will have a strong, experienced team drawn from both organizations who will implement the best practices of both. The management of the combined railroad is committed to keeping in place significant levels of employee share ownership and incentive plans based on industry-leading service and efficiency."

"We are delivering on CN's promised turnaround strategy and focusing on our customers, shareholders and employees," Tellier said. "CN is now positioned to thrive in the North American railroad industry of the 21st Century."