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Santa Fe Says No to Bid From Union Pacific : Transportation: In spurning its rival's $3.2-billion offer, the railroad reaffirms plan to merge with Burlington.

October 07, 1994|From Associated Press

NEW YORK — Santa Fe Pacific Corp. late Thursday spurned a $3.2-billion takeover bid from rival Union Pacific Corp. and reaffirmed plans to merge with Burlington Northern Inc. in a $2.5-billion deal.

The terse rejection announcement by Santa Fe's board says they believe the merger with Burlington Northern is better for shareholders despite the lower price and that that merger would be far more likely to receive federal approval.

"Union Pacific has now decided to interject a proposal which has little chance of being consummated because Union Pacific does not want to compete with a merged Burlington Northern Santa Fe Railway," the Santa Fe board said in the statement issued from its Schaumburg, Ill., headquarters.

Union Pacific, which made the surprise offer barely 24 hours earlier, said in a statement that it is disappointed with the Santa Fe board's response.

"Without ever talking to us, and without due consideration, we think the Santa Fe Pacific board has given short shrift to our proposal," said Drew Lewis, chairman and chief executive of Bethlehem, Pa.-based Union Pacific.

Burlington Northern's board said earlier in the day that it would proceed with its lower offer for Santa Fe rather than try to outbid Union Pacific in what it foresaw as an expensive railroad takeover brawl.

Both Santa Fe and Burlington Northern said they believed Union Pacific's high bid would be rejected by the Interstate Commerce Commission, which regulates the U.S. rail industry and ensures competition in all areas of the country.

Burlington Northern, which is based in Ft. Worth, said it plans to proceed with its merger application with the ICC next week.

The elbowing between Burlington Northern and Union Pacific marks the latest in a merger frenzy aimed at stitching together ever larger and more efficient networks to take advantage of a resurgence of the rail industry.

Union Pacific operates a 19,000-mile network spanning the West, Midwest and Gulf Coast regions. Santa Fe operates an 8,750-mile system that links Chicago, the West Coast and the Gulf of Mexico.

A combination would create a rail behemoth bigger than Burlington Northern, which already operates the longest rail system in North America, a 25,000-mile network spanning 25 states and two Canadian provinces.

Union Pacific has acknowledged that the deal could give it a monopoly on traffic between California and the Midwest and wheat shipped by farmers in Kansas and Oklahoma. But Union Pacific has offered to work out special deals with Burlington and Southern Pacific to preserve competition.

Union Pacific "wrongly believes that negotiating with other carriers will eliminate the substantial anticompetitive impacts of the merger," Burlington said in a statement.

Union Pacific filed suit Thursday in Delaware Chancery Court to try to force Santa Fe to open negotiations over the bid.

On the New York Stock Exchange, Santa Fe closed up 87.5 cents per share at $13.50. Union Pacific fell $1.875 to $50, and Burlington Northern fell 50 cents to $48.875.

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