Fw: Burlington Northern Santa Fe, Canadian National to merge?

[Don Mills <dmills@MARSHALL.EDU>]

Aus loco discussion mailing list



A bit of news that might be of interest to you fellas.   If this merger
pulls off it will be an astounding feat as it will cover two thirds of the
US and Canada.   Don in WV

Date: Monday, December 20, 1999 8:52 AM
Subject: Fw: Burlington Northern Santa Fe, Canadian National to merge?


>
> Subject: WS: Burlington Northern Santa Fe, Canadian National to merge?
>
>
>>Burlington Northern Santa Fe, Canadian National to merge?
>>
>>By Lawrence H Kaufman
>>
>>Journal of Commerce Staff
>>
>>Despite the well-publicized problems of integrating mergers, railroads may
>>not have lost the urge to merge.
>>
>>The railroad industry was awash at the weekend with speculation that
>>Burlington Northern Santa Fe Corp. and Canadian National Railway are ready
>>to
>>announce a combination, perhaps as early as Monday. Executives and
managers
>>reportedly have been told to stand by for an important announcement.
>>
>>Some BNSF executives Friday believed their railroad was about to acquire
>>Kansas City Southern.
>>
>>Officials at BNSF and Kansas City Southern did not return calls for
comment
>>Friday. Investor relations executives also were not returning calls from
>>Wall
>>Street analysts.
>>
>>Mark Hallman, a spokesman for Canadian National, said the company does not
>>respond to speculation.
>>
>>BNSF-CN combination would vault the combined company past Union Pacific
>>Railroad as the largest in North America, with annual revenue in excess of
>>$13 billion. It was unclear whether it would be an acquisition or a merger
>>of
>>equals, but based on size alone, it appears that BNSF would acquire CN.
>>
>>The stock of both railroads was up in Friday trading, with BNSF selling at
>>$28.56 a share, up 75 cents on 50% higher-than-normal volume. CN was at
>>$30.19, up $1 near the close of New York Stock Exchange trading on light
>>volume.
>>
>>Like most railroads, BNSF's stock price has languished this year. Its
stock
>>has sold as high as $37.93 a share in the last 52 weeks.
>>
>>A BNSF-CN combination would have to be cleared by the Surface
>Transportation
>>Board, which earlier this year approved the CN acquisition of Illinois
>>Central Railroad. There is virtually no direct competition between the two
>>systems, and some rail experts speculated they would not have difficulty
in
>>gaining regulatory approval.
>>
>>UP could be expected to fight the combination, however, just as it mounted
>>the most extensive opposition to the CN-IC transaction. Much traffic that
>>now
>>is interlined between the CN-IC system and UP could be expected to move
>over
>>the BNSF.
>>
>>The sheer size of BNSF-CN would assure that it would be the dominant
>company
>>in the eventual transcontinental merger that most still expect to take
>>place.
>>UP, the nation's largest railroad, would see its bargaining power sharply
>>curtailed.
>>
>>Executives at other railroads would say nothing for the record, but at
>least
>>one said they had begun to hear reports of BNSF-CN negotiations in the
last
>>week. The combination, if it takes place, would create a giant rail system
>>blanketing the western half of the United States bnd running
>>transcontinental
>>across Canada.
>>
>>For the first three quarters of 1999, BNSF earned $818 million, or $1.74 a
>>share, on revenue of $6.73 billion, all slightly more than in the first
>nine
>>months of 1998. CN earned $538 million, or $2.71 a share, on $3.856
billion
>>revenue. In the comparable 1998 period, CN earned $416 million, or $2.15 a
>>share, on virtually the same revenue.
>>
>>BNSF's failure to retain more of the traffic and revenue it captured from
>UP
>>during the latter's 1997-98 service crisis has disappointed senior
>>executives
>>and Wall Street. The railroad has poured more than $7 billion of new
>capital
>>into its system in the three years since Burlington Northern merged with
>>Santa Fe.
>>
>>According to one source who claimed to know what was transpiring, Robert
D.
>>Krebs, BNSF chairman and chief executive would stay on in that position
for
>>a
>>specific, but short, time and would be succeeded by Paul M. Tellier, now
>>CN's
>>chairman, president and chief executive.
>>
>>Sources who would speak only on condition that they not be identified say
>>the
>>two railroads would be a good fit from a traffic and route structure
basis.
>>They also cautioned that deals of this magnitude swing not on route
systems
>>and traffic bases, but on the egos of the top people involved.
>>
>>Lawrence H Kaufman can be reached at LKauf81509@aol.com.
>
>


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