Santa Fe Southern Offer to Buy Henley’s 14.7% Stake Rejected

Santa Fe Southern Pacific offered to buy back Henley Group’s 14.7% stake in the Chicago company for an undisclosed amount of cash and assets, but the offer was rejected and negotiations were terminated, the companies disclosed Monday.

Henley Group revealed in a filing with the Securities and Exchange Commission that Santa Fe Southern asked Henley on Thursday evening to consider a proposal in which Santa Fe Southern “would acquire all the shares owned by Henley in exchange for a combination of cash and certain assets.”

La Jolla-based Henley, which had offered to buy Santa Fe Southern through a combination of cash and securities, rejected the Santa Fe Southern buyback proposal on Friday, the filing said. Santa Fe Southern, parent of the Southern Pacific and Santa Fe railroads, said Monday that all negotiations between the two had ended. Santa Fe Southern earlier this month had broken off takeover talks with Henley when the company would not meet Santa Fe Southern’s $63-per-share price and because of possible regulatory difficulties.

But Henley in a statement said it is still interested in taking over Santa Fe Southern.

“Instead of pursuing the (buyback) proposal, Henley believes Santa Fe should seek to take action to maximize the value of its shares for all Santa Fe shareholders, including the possibility of a transaction in which all of the outstanding Santa Fe shares would be acquired by Henley,” the company said. A Henley spokesman declined further comment on the company’s plans.

Pose No Problems

For its part, Santa Fe Southern said it intends to pursue its previously announced restructuring plan. “We believe the restructuring program we have proposed is in the best interests of our stockholders and we plan to proceed with it,” a company spokesman said. Santa Fe Southern’s proposed restructuring involves the sale of certain assets and will result in the payout of at least $4 billion in cash and/or securities to shareholders.

Henley said its takeover of Santa Fe Southern would pose no regulatory problems. Henley said that “such an acquisition would not present any more serious regulatory issues than are presented by transactions (that Santa Fe Southern) has announced it is currently considering.”

Separately, Henley Chairman and Chief Executive Michael D. Dingman said: “As the largest shareholder of Santa Fe Southern Pacific Corp., we believe the company is selling the wrong railroad.” To comply with the order by the Interstate Commerce Commission that blocked the merger of Santa Fe Southern’s two railroads, the company must sell one of its subsidiary railroads. Dingman said that Santa Fe Southern “should sell or spin off the Santa Fe Railway, which is the stronger of the two, and keep and strengthen the Southern Pacific Transportation Co., which can be greatly improved.”