Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, February 9, 1995 TAG: 9502100049
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: FROM STAFF AND WIRE REPORTS
DATELINE: LENGTH: Long
In Fort Worth, Texas, Burlington's headquarters, no shareholders spoke ill late Tuesday of the price the railroad is paying for Santa Fe - $3.9 billion, at least $1.2 billion more than originally planned. A bidding war with rival Union Pacific drove the price up.
The merger plan called for Burlington and Santa Fe to purchase one-third of Santa Fe's 189 million shares for $20 a share after shareholder approvals. The balance of the transaction provides for the remaining shares of Santa Fe to be exchanged for 0.4 share of Burlington stock after regulatory approval.
``This is a historic day for us,'' Burlington Northern Chairman Gerald Grinstein told about 120 shareholders.
Santa Fe investors, who had their own meeting near the company's Schaumburg, Ill., headquarters, were gleeful for Union Pacific's role in the Santa Fe bidding. Burlington and Santa Fe agreed to merge last year in a deal worth about $13.50 per share of Santa Fe, but Union Pacific jumped in with a hostile bid, forcing Burlington to increase its bid to $20. Union Pacific threw in the towel last week.
``That's competition, and that's a wonderful thing,'' Santa Fe Chairman Robert Krebs told an estimated 435 people who attended the company's meeting. ``It brought our price up.''
But not everyone will benefit.
As part of their consolidation, the two railroads estimate they will cut 2,750 jobs systemwide, or about 6 percent of the companies' combined 45,000 employees.
The merger attempt is the first between major U.S. railroads since the Santa Fe and Southern Pacific lines attempted one in the mid-1980s that was rejected by the Interstate Commerce Commission on the grounds that it would create a monopoly.
Last summer, word leaked out that Norfolk Southern and Conrail, which serves the Northeast, had begun talking about a merger even before the Burlington Northern and Santa Fe talks began. Such a merger was viewed as a potential boon to Roanoke because it would have brought more business to the NS maintenance shops. The talks reportedly broke off, even though NS never publicly admitted any discussion had occurred.
In an interview late last year, NS Chairman David Goode said more mergers could be expected in the rail industry, but he was unsure when. The demands of shippers may encourage mergers, but if railroads can find better ways to cooperate, then mergers may not be needed, Goode said.
Local rail union leaders in Roanoke don't like mergers but haven't been overly concerned by the Burlington Northern-Santa Fe marriage.
``Mergers always cost people jobs,'' said Joe Pugh, general chairman of the Maintenance of Way union in Roanoke.
``We don't like for the bigger railroads to merge,'' said Bobby Gates, a general chairman with the United Transportation Union in Roanoke, representing brakemen and yard workers. ``It cuts a lot of men out.''
The Burlington-Santa Fe merger would create a railroad with more than 32,000 miles of track; put Burlington in Southern California, a lucrative market it has long yearned to enter; and improve westward rail service.
The combined railroad would extend from Chicago through the Midwest, to the Texas Gulf Coast through Fort Worth, and also to the Pacific Coast through Seattle, Portland, Oregon and Los Angeles.
Grinstein told his shareholders the merger will improve connections to the Pacific Rim and Mexican markets for customers. He noted that the builder of the Great Northern Railroad, a predecessor line to Burlington Northern, had sought connection to California before the start of this century.
Grinstein said Burlington and Santa Fe soon will create a joint committee to study ways to combine the two companies. He would be chairman of the new company, and Krebs would be president and chief executive.
The two companies said they have made no decisions about where to have the company's headquarters or the number of executives who will be cut.
``In a merger, the first order of business is to maintain service,'' Grinstein said. ``So, you probably err on the side of having an organization that is a bit more plump at the start.''
The ICC's decision on the merger might be its last, because President Clinton singled the agency out for closure in his proposed budget. Congressional Republicans also have called for its abolition.
Shareholders entering the grounds of the Burlington operations center Tuesday were greeted by several dozen members of the Brotherhood of Maintenance of Way who were protesting what they called Burlington Northern's too-long work schedules for track maintenance workers they represent.
The workers' demonstration had no impact inside. Grinstein noted that both Burlington Northern and Santa Fe ranked in the top four of the nation's railroad in safety during 1994 and vowed that the merger would make the combined system even safer.
Staff writer Greg Edwards, the Fort Worth Star-Telegram and the Journal of Commerce contributed to this story.
by CNB