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Conrail Bid for Parts of Southern Pacific

Rail: The tabled $1.5-billion offer was made before Conrail joined opponents of a Union Pacific-Southern Pacific merger.

April 06, 1996|From Bloomberg Business News

PHILADELPHIA — Conrail Inc. offered $1.5 billion for some rail lines owned by Southern Pacific Rail Corp. before joining opponents of Southern Pacific's plan to be acquired by Union Pacific Corp.

Conrail said it bid for San Francisco-based Southern Pacific's eastern lines in September. The offer was rejected but remains on the table, Conrail said in a filing with the Surface Transportation Board last week.

The offer was made to Bethlehem, Pa.-based Union Pacific, which has agreed to pay $3.9 billion for Southern Pacific and take on $1.5 billion of its debt.

The lines being sought make up about 3,000 miles of rail linking Chicago and Houston, and New Orleans and El Paso, Texas, said Conrail spokesman Bob Libkind.

"That's not what we wanted and not what our customers wanted," said Union Pacific spokesman Mark Davis.

After Union Pacific rejected its offer, Conrail became the biggest railroad to oppose the Union Pacific-Southern Pacific merger, which would create a railroad with 31,000 miles of track in 25 states.

Other opponents include shippers, the Texas Railroad Commission and states that say the combination would stifle rail competition. The opponents had until last Friday to file their comments with the STB.

Proponents include General Motors Corp., Exxon Chemical Americas and Minnesota Mining & Manufacturing Co. California Atty. Gen. Daniel E. Lungren said on Thursday that he supports the combination because its benefits, including increased competition in areas dominated by Burlington Northern Santa Fe Corp., would outweigh "theoretically adverse competitive effects."

The Conrail bid came as Union Pacific considered a trackage rights agreement with BNSF, Davis said. Union Pacific ultimately agreed to share about 3,800 miles of track with the BNSF to ease concerns about competition. Opponents say the agreement doesn't guarantee future competition.

Kansas City Southern Railway Co. also expressed interest in buying some of Southern Pacific's eastern lines, said Michael Haverty, president and chief executive of the Kansas City Southern Industries Inc. unit.

It never made a formal bid, though, because it could not get necessary information about Southern Pacific traffic, Haverty said. The railroad remains interested in acquiring some Southern Pacific lines because "we are the only railroad west of the Mississippi River that is truly adversely affected by the Union Pacific-Southern Pacific merger," Haverty said.

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