UP Raises Bid for Santa Fe

Union Pacific Corp., trying to derail a rival suitor, said Tuesday it raised its bid for Santa Fe Pacific Corp. by about $300 million to $3.6 billion and offered cash for all the railroad company’s shares.

Locked in a battle for Santa Fe with Burlington Northern Inc., Bethlehem, Pa.-based Union Pacific said it wants to acquire 100% of Santa Fe’s stock for $18.50 a share in a deal worth $3.6 billion.

Previously, Union Pacific had offered $17.50, or $3.3 billion, in cash and stock.

A spokesman for Burlington Northern said the company had no immediate comment on Union Pacific’s sweetened offer.

But Santa Fe, owner of the Atchison, Topeka and Santa Fe Railroad, has agreed to be acquired by Burlington Northern Inc. in a complex $3.8-billion deal.

Under that arrangement, Schaumburg, Ill.-based Santa Fe would be acquired in a deal worth about $20 a share. Under the terms of the two-phase agreement, Burlington Northern is buying 25 million Santa Fe shares at $20 a share. At the same time, Santa Fe is buying back 38 million of its own shares for $20 a share.

The combined offers are due to expire Jan. 30.

In the second phase of the deal, Burlington will swap 0.4 of its shares for each Santa Fe share still outstanding.

Union Pacific said its new offer is subject to termination of Santa Fe’s merger agreement with Ft. Worth-based Burlington Northern, and other conditions.

“Our preference remains to negotiate a merger agreement with Santa Fe,” said Union Pacific Chairman Drew Lewis in a letter to Santa Fe Chairman Robert Krebs. “If you refuse to negotiate with us, we would be prepared to purchase shares in our tender offer without a merger agreement . . . .”

Analysts said Union Pacific’s new bid may not be enough.

“I think the dollar amount is a surprise in that it’s so low,” said Susan Chapman, an analyst at Forbes, Walsh, Kelly in New York.