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UP Raises Bid for Santa Fe

From Reuters

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.

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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.

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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.

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