Burlington Northern Makes New Bid for Santa Fe Pacific

Burlington Northern Inc., trying to deal a knockout blow to a rival bidder, announced Sunday that it has reached a new agreement to buy the Santa Fe Pacific Corp. That raises the railroad company’s purchase price to $3.8 billion.

The two-step deal, which would create the nation’s largest railroad, was designed to defeat a hostile $3-billion-plus offer for Sante Fe Pacific by Union Pacific Corp.

Union Pacific spokesman Gary Schuster said Sunday night that his company, currently the nation’s biggest railroad concern, will study the new Santa Fe-Burlington Northern merger pact. He said Union Pacific, based in Bethlehem, Pa., remains interested in acquiring Santa Fe.

James Valentine, a railroad industry analyst for Smith Barney Inic. in New York, predicted that Union Pacific would come back with another offer for Sante Fe Pacific. “Union Pacific has a tremendous amount of resources, and there’s no reason to believe it won’t use them to try to acquire Santa Fe.” Under the first part of the new Burlington Northern-Santa Fe agreement, Santa Fe will conduct a cash tender offer for 38 million of its own shares at $20 each, or a total of $760 million. That represents about 20% of Santa Fe’s outstanding shares.

At the same time, Burlington Northern will launch a tender offer for 25 million Santa Fe shares at $20 each, or a total of $500 million. That offer represents about 13% of Santa Fe.

Following the tender offers, the companies would await approval of their merger plans by the Interstate Commerce Commission, which they said is expected in mid-1996. The merger would then be completed through a stock swap at a ratio of 0.40 share of Burlington Northern for each remaining Santa Fe share.

All told, the deal is being valued by the companies at $3.8 billion, up from a previous agreement valued at around $3.2 billion.

“The boards of directors of BN and Santa Fe have unanimously reaffirmed their commitment to bring together our two great railroads in a win-win transaction for everyone concerned,” Gerald Grinstein, chairman and chief executive of Burlington Northern, said in a statement.

Burlington Northern and Santa Fe initially agreed on a $2.5-billion deal in July, but that agreement later was derailed by a Union Pacific offer that has been valued at as high as $3.8 billion. The companies said the tender offers will begin Thursday and should be completed in late January.