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Southern Pacific - AT&SF Merger

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This page last updated on February 1, 2014.

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(This is a work in progress; research continues.)

Timeline

May 1980
Southern Pacific announced at its mid-May stockholder's meeting, a proposed merger with Atchison Topeka and Santa Fe Railway. (Pacific News, April 1980, page 24)

December 23, 1983
Santa Fe Industries (parent company of AT&SF Railway) and Southern Pacific Company (parent company of Southern Pacific Transportation Co.) merged to form the Santa Fe Southern Pacific Corporation, with an effective date of December 31, 1983.

The Santa Fe Southern Pacific Corporation was formed on December 23, 1983, with the merger of the parent companies of the SP and AT&SF, but the railroads themselves were not joined at the time because of the need to follow Interstate Commerce Commission procedures. On March 23, 1984, the SFSP filed a merger application with the ICC to form a new railroad to be named the Southern Pacific & Santa Fe, headed by Lawrence Cena, currently president and CEO of the AT&SF. SFSP Chairman John J. Schmidt said that "No major line abandonments are anticipated in the application. The operating plan involves shifting of traffic over the most direct routes to expedite service, but there are no plans to cancel service to any community currently being served." The ICC has 31 months to act on the merger proposal. (Railfan & Railroad, July 1984, page 26)

March 23, 1984
Santa Fe Southern Pacific Corp. (the AT&SF parent company) applied to the ICC for approval to merge with and control of the Southern Pacific Transportation Co. The new railroad subsidiary would be called the Southern Pacific & Santa Fe Railway.

October 1, 1984
The ICC began hearings into the proposed AT&SF/SP merger.

July 24, 1986
The proposed SPSF merger was denied by the ICC. The SFSP Corp. parent company appealed the ICC decision on August 4, 1986. (Pacific RailNews, Issue 275, October 1986, page 8)

January 5, 1987
Kansas City Southern Industries announced that they were willing to buy SP, in lieu of a completed merger of AT&SF and SP, pending the appeal before the ICC. (CTC Board, Issue 140, February 1987, page 3)

June 30, 1987
The SPSF merger appeal was denied by the ICC. The ICC gave the parent corporation 90 days to divest itself of one or both railroads. (Pacific RailNews, Issue 288, November 1987, page 8)

The following comes from the July 1987 issue of CTC Board, page 16:

Shotgun Divorce . . . The Southern Pacific continues to drift along without a clear destination in sight after the refusal of the Interstate Commerce Commission to reopen the Santa Fe-Southern Pacific merger application on June 30. SFSP Corporation was given 90 days from the June 30 date to submit a plan on how it will divest itself of one or both railroads (as required by the ICC). Until the 90 days expire on September 28, it is purely speculation by anyone as to what will become of the SP and the Santa Fe, as the decision will most likely be a closely-guarded secret until then.

However, Kansas City Southern announced immediately after the ICC decision that it would present an offer to buy Southern Pacific within the next 60 days. While KCS is the only railroad to announce an offer to buy SP, Burlington Northern, Norfolk Southern and Conrail have either expressed an interest in SP or are reported to be very interested in SP. BN has said it "would be foolish" not to look at either SP or Santa Fe if one or both go on the market. Norfolk Southern Chairman Arnold McKinnon has said that his company would seriously look at any western railroad that came onto the market. Even Conrail may be interested in acquiring one or both lines, although changes in the law that transferred Conrail to the private sector would have to be made. Finally, some of SP's upper management indicated that they would like to see SP remain an independent road and are reported to be working on an offer to buy SP (this may also include some type of employee involvement). At this time, it appears that SP may be caught up in a bidding war, if indeed SP is the railroad sold by SFSP to satisfy the ICC.

September 4, 1987
SP's parent company, Santa Fe Southern Pacific Corp., announced that it would sell the entire Southern Pacific Transporation Co., to satisfy the ICC ruling that the parent comapny divest itself of one of the two railroads, either SP or AT&SF. (CTC Board, Issue 147, September 1987, page 50)

The following comes from the November 1987 issue of Trains, page 9:

Who wants SP? -- Santa Fe Southern Pacific had a September 28, 1987, deadline to submit to the ICC a 2-year divestiture plan for one of its two railroads, and made the expected official 24 days early by putting SP up for sale. SPSF may sell SP in entirety or piecemeal, or spin it off to SPSF stockholders. Three SP suitors were known: Kansas City Southern, SP employees (announced by the Railway Labor Executives' Association, whose 17 unions represent 25,000 SP employees), and SP management, which is looking at a possible leveraged buyout (wherein a group of investors acquires a firm mostly with debt that eventually is retired with revenue from the new company). KCS maintained it had financing lined up, hinted that if it bought SP it would sell the Overland Route line from Ogden, Utah, into California to Denver & Rio Grande Western. KCS parent KCS Industries, though, faced a possible corporate takeover bid by a group led by New York real estate investor Howard Kaskel, who said KCS's attempt to buy SP could harm its earnings. (In 1986, KCS's railroad earned $17.6 million on $487.7 million revenues, SP $14.1 million on $2.3 billion revenues.) There could be a bidding war for SP, and presumably sale would include its subsidiary Cotton Belt (SP's access to Memphis, St. Louis, and Kansas City). There were hints Santa Fe wanted to keep Cotton Belt, but it's doubtful the ICC would approve that. Historically, Santa Fe has wanted to reach St. Louis but has been thwarted. Stay tuned.

The following comes from the December 1987 issue of Trains, page 10:

D&RGW + SP? Denver & Rio Grande Western has entered the field of possible suitors for Southern Pacific, says it would keep SP intact with headquarters in San Francisco. Meanwhile, Santa Fe, fighting possible corporate raids on what would be a slimmed-down company after it sheds SP and some nonrail properties, announced a plan to buy back 38 per cent of its outstanding common stock, to be paid for from income from several sources, including the SP divestiture, a public offering of up to one-fifth of Santa Fe Energy stock, and transfer of real estate into a new investment trust. Other companies eyeing SFSP include the Henley Group of California, which acquired 5 per cent of SFSP, and Olympia & York of Toronto, which bought 6 per cent.

The following comes from the August 1988 issue of Pacific RailNews, page 4:

SP Sale to Rio Grande Endorsed by Justice Dept, UP, Santa Fe Seek Rights -- Sale of SP to Rio Grande Industries has received the blessing of the Justice Dept., removing one of the last obstacles to ICC approval of purchase from SFSP Corp. The opposition of the same Justice Dept. played a large role in denial of the proposed AT&SF-SP merger. Its endorsement was contained in a May 9, 1988, filing at the ICC.

The only common points served by SP and Rio Grande are at Odgen, Utah; Kansas City, Missouri; and Herington, Kansas.

Union Pacific asked the ICC to give it service and rate-setting rights on traffic moving from all SP points not served by UP in Oregon, Nevada, Utah and part of California moving via the Central (UP) Corridor.

Kansas City Southern Industries, parent of the KCS, continued its quest for purchase of SP, which it said would create "a more competitive Western railroad environment than the Rio Grande-SP merger would." It offers to pay SFSP $1 billion in cash plus $250 million in debt instruments, plus assuming $800 million of SFSP debt.

RGI offered $1.02 billion in cash and to assume $700 million in SP's debt. Efforts by KCSI to bring Rio Grande owner Philip Anschutz or the Anschutz Corp. into the proceedings were denied by the Commission.

Financing potential for KCSI's bid, however, may be somewhat open because of its own financial problems due to the court judgement regarding coal contracts.

Should the KSCI bid for SPT be approved, Santa Fe Railway asked the ICC to attach trackage rights for it over the KCS in south Texas and Louisiana between Houston and New Orleans (with the right to serve all existing and future facilities on the line), and over the SP lines between Beaumont and Port Arthur, Dayton and Bayton, Houston and Barbour's Cut, and Strang and Seabook (all in Texas).

AT&SF also would seek overhead rights on KCS between Farmersville, Texas, and Shreveport, La., along with interchange rights in Shreveport and the right to serve existing and future customers there.

(Read more about the D&RGW - SP merger.

More Information

SP Corporate History -- General notes about Southern Pacific corporate history.

SP at UtahRails -- An index of SP information at UtahRails.

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