Santa Fe Shareholders Urged to Reject Union
Santa Fe Pacific Corp. advised shareholders Tuesday not to tender their stock to unwanted suitor Union Pacific Corp., saying its $3.3-billion bid was too low.
Santa Fe, which also is being wooed by Burlington Northern Inc., cited a Union Pacific statement that it might boost its bid to $20 a share from $17.50 if it is allowed to examine Santa Fe’s financial records.
Union Pacific spokesman Gary Schuster said his company is willing to discuss a higher bid but has not been invited to meet with Santa Fe.
Burlington Northern Inc.’s competing bid for Santa Fe is currently worth $3 billion, or about $16.07 a share.
Rail industry analyst Scott Flower of Kidder Peabody Inc. said Santa Fe was trying to block a hostile takeover by Union Pacific. But he said Union Pacific probably will prevail unless Burlington Northern Inc. sweetens its bid.
“They’re hoping shareholders will say no,” Flower said. “But in the absence of a better offer, it looks like shareholders will tender to Union Pacific.”
Santa Fe and Burlington Northern shareholders are scheduled to vote Dec. 2 on their companies’ merger proposal, which would be accomplished by exchanging 0.34 of a Burlington share for each share of Santa Fe stock.
On Nov. 11, Union Pacific, the nation’s largest railroad, proposed to buy 57% of Santa Fe’s stock from shareholders at $17.50 a share, then negotiate an agreement to acquire the rest of the shares for a combination of cash and stock, also worth $17.50. The tender offer expires Dec. 8, but can be extended, Schuster said.
At stake is control of the Atchison, Topeka & Santa Fe Railway, the nation’s seventh-largest railroad in terms of revenue, with routes from Chicago to Southern California. The Santa Fe route is more direct than Union Pacific’s. Burlington, based in Fort Worth, Tex., has no such route.
Santa Fe’s stock fell 25 cents Tuesday to $16 a share on the New York Stock Exchange.
Santa Fe is based in the Chicago suburb of Schaumburg. Union Pacific is based in Bethlehem, Pa.
