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Union Pacific to Buy Remaining 70.5% of CNW : Transportation: The deal gives the railroad access to the lucrative coal fields located in eastern Wyoming.

March 11, 1995|From Associated Press

CHICAGO — Union Pacific Corp. will acquire the rest of Chicago and North Western Transportation Co., the nation's eighth-largest railroad, for $35 a share, or about $1.2 billion, the companies said Friday.

The widely anticipated deal values Chicago-based CNW at $1.6 billion. Union Pacific, the nation's largest railroad in terms of revenue, already owns 29.5% of CNW.

CNW provides Union Pacific's only direct link to coal fields in the Powder River Basin of eastern Wyoming and also serves as the link for Union Pacific trains between Omaha, Neb., and Chicago.

The Chicago-based railway has about 6,000 employees and 5,600 miles of track in nine states.

Union Pacific spokesman Harvey Turner said it was too soon to know how the proposed merger would affect employment levels. John Bromley, another Union Pacific spokesman, projected savings of $184 million annually over the combined operating costs of the railroads.

CNW's stock surged $8.125 on the New York Stock Exchange to close at $34.25 a share. Union Pacific added 87.5 cents to end at $51 a share.

The deal, already cleared by the Interstate Commerce Commission, is subject to negotiation of a definitive purchase agreement and approval by both companies' boards of directors.

"I am very excited about this transaction," Union Pacific Chairman Drew Lewis said in a statement.

"This is a strategic move that will make Union Pacific an even greater mover of southern Powder River Basin coal, grain, intermodal and other products."

Intermodal refers to moving semitrailers by rail, a concept that has helped revive the U.S. freight train industry.

Union Pacific, based in Bethlehem, Pa., acquired its stake in CNW through its participation in a 1989 debt-financed takeover of CNW and through additional stock purchases when CNW went public again in 1993.

Union Pacific, which operates 17,500 miles of track in the Midwest, Southern Plains and the West, recently lost a battle with Burlington Northern Inc. to take over Santa Fe Pacific Corp.

That deal, awaiting regulatory approval, would make Burlington Northern the largest railroad in the country.

Through the first nine months of 1994, Union Pacific had freight revenue of $3.8 billion, according to the Assn. of American Railroads. CNW's freight revenue for the period totaled $600 million.

The rail association said it had not yet compiled revenue figures for all of 1994.

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