Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, July 21, 1995 TAG: 9507210045
SECTION: BUSINESS PAGE: A-7 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
The companies and analysts foresee benefits for carmakers, farmers and other shippers, although some critics worry about harm to competition.
The 4-0 vote by the Interstate Commerce Commission on the $4 billion deal continues the consolidation of the railroad industry.
``There's a lot of concern, I think, out there about whether there's going to be additional discussion of future mergers,'' said the ICC's chairman, Linda J. Morgan. ``Interestingly enough, you may see more combinations among smaller railroads.''
Norfolk Southern Corp., itself among the major railroads often rumored to be discussing merger plans, declined to comment Thursday on the Burlington-Santa Fe pact.
NS spokesman Robert Fort said the company had not yet seen the ICC order so would not comment directly. But "like everyone else in the railroad industry, we are watching it with interest," he said.
Congress is moving to kill the 108-year-old ICC, possibly by year's end, and the Justice Department could get authority over mergers.
``I do not consider this the end of consolidation,'' said analyst Mark Altherr of Salomon Brothers Inc., but approval could be tougher with a move to the Justice Department.
The ICC will put Thursday's decision in writing by Aug. 23, and the companies could complete the merger by the end of September, said Rob Krebs, Santa Fe's chairman.
The new rail network would stretch from Canada to Mexico, with 33,000 miles of track in the Midwest, West and Southeast. It would have about $7 billion in annual revenue and dominate rail cargo in the West.
The railroads plan to eliminate 2,750 jobs and save $450 million while speeding the flow of goods across the country.
Network operations probably will be in Fort Worth, Texas, where Burlington Northern has its headquarters, Krebs said. The companies have not decided on their corporate base. Santa Fe's home is the Chicago suburb of Schaumburg.
The merger combines Burlington Northern's specialty in hauling grain, coal, autos and timber with Santa Fe's pioneering use of intermodal transportation - carrying semitrailers on flat-bed rail cars.
Another benefit is the enhanced opportunity to ship goods over long distances without switching carriers.
The ICC rejected most complaints about potential competitive harm. Commissioners noted that Burlington Northern and Santa Fe had negotiated agreements with chief rivals Southern Pacific and Union Pacific, and other lines to ensure continued competition on routes under scrutiny by regulators.
Analysts cheered the one-two punch: an approval with virtually no strings attached. ``This is very good news,'' said Salomon Brothers analyst James Valentine in a report Thursday. ``We couldn't imagine a better scenario.'' Burlington Northern shares closed up $2.62 1/2 a share to $68. Santa Fe shares were up $1.62 1/2 to $27.87 1/2.
Consumers stand to gain if savings flow from the railroads to their industrial customers to the shopper at the cash register because of lower operating costs. This is far from certain, though.
Staff writer Greg Edwards and Bloomberg Business News contributed to this story.
by CNB