Burlington to Keep Low Bid for Santa Fe : Rail: Company feels Union Pacific’s $3.2-billion offer will be turned down by the ICC and wants to avoid runaway price war.
Burlington Northern Inc. decided Thursday to stick with its lower offer for Santa Fe Pacific Corp. rather than try to outbid Union Pacific Corp., in what could have become an expensive railroad takeover brawl.
Burlington Northern’s board said it doesn’t think Union Pacific’s high bid, valued at $3.2 billion, will be approved by the Interstate Commerce Commission, which regulates the U.S. rail industry. It said it plans to proceed with its merger application filing with the ICC next week.
However, Union Pacific turned its unsolicited bid into a full-scale hostile takeover run at Santa Fe, filing a lawsuit that seeks to derail Burlington’s $2.5-billion bid.
Union Pacific filed the suit Thursday in Delaware Chancery Court against Burlington, Santa Fe and the members of the Santa Fe board.
Union Pacific is seeking a judgment that would allow Santa Fe to terminate the merger agreement with Burlington and allow it to accept Union Pacific’s proposal.
The company also requested an injunction requiring Santa Fe to negotiate with Union Pacific regarding its proposal. Santa Fe has already agreed to a buyout from Burlington Northern.
The elbowing between Burlington Northern and Union Pacific marks the latest in a merger frenzy aimed at stitching together ever larger and more efficient networks to take advantage of a resurgence of the rail industry.
Union Pacific operates a 19,000-mile network spanning the West, Midwest and Gulf Coast regions. Santa Fe operates an 8,750-mile system that links Chicago, the West Coast and the Gulf of Mexico.
A combination would create a rail behemoth bigger than Burlington Northern, which already operates the longest rail system in North America, a 25,000-mile network spanning 25 states and two Canadian provinces. Union Pacific has acknowledged that the deal could give it a monopoly on traffic between California and the Midwest and wheat shipped by farmers in Kansas and Oklahoma. But it has offered to work out special deals with Burlington and Southern Pacific to preserve competition.
On the New York Stock Exchange, Santa Fe closed up 87.5 cents per share at $13.50. Union Pacific was down $1.875 at $50, and Burlington Northern was off 50 cents at $48.875.
