Shareholders Approve Rail Deal Merger Of Bn, Santa Fe Could Benefit Farmers, Automakers, Other Shippers
The proposed merger of railroad companies Burlington Northern Inc. and Santa Fe Pacific Corp. promises a host of benefits to carmakers, farmers and shippers looking for better connections across the Great Plains or over the Rocky Mountains.
The $4 billion deal was approved Tuesday by Burlington Northern and Santa Fe shareholders. It also needs approval by the Interstate Commerce Commission.
Burlington Northern agreed in June to buy Santa Fe for $2.5 billion. The deal ran into trouble in October when Union Pacific Corp. made a competing bid. Union Pacific bowed out Jan. 31 after a four-month bidding war that forced Burlington Northern to bump its price up to about $4 billion in cash and stock.
The merger would create the nation’s largest rail network, stretching from Canada to Mexico, with 33,000 miles of track in the Midwest, West and Southeast. It would have about $7 billion in annual revenue and dominate rail cargo in the West.
Burlington Northern’s Spokane division oversees about 700 employees and 550 miles of track, stretching from Wenatchee to Spokane, and Sandpoint to Pasco. Thousands of tons of lumber, cement, automobiles, frozen french fries and other freight are routed daily through Spokane.
Santa Fe’s nearest lines end at San Francisco.
The merger would marry Burlington Northern’s specialty in hauling grain, coal, autos and timber with Santa Fe’s pioneering use of intermodal transportation - carrying semi-trailers on flat-bed rail cars. Intermodal has been the fastest growing segment of the rail industry in recent years.
For Ford Motor Co., it would mean faster shipping between the Midwest and the West Coast and better access to Mexico.
For a group of farmers near Ralston, Iowa, it would mean a whole new market.
They and other businesses have provided the ICC with 450 supportive letters from shippers. The biggest benefit of the merger, according to these testimonials, would be the enhanced opportunity to ship goods over long distances without switching carriers.
It is in the switching yards, they say, that shippers incur avoidable costs due to delays, damage, theft and switching fees.
For instance, the West Central Cooperative of Ralston, Iowa, said the merger will allow direct shipments of its corn to cattle feedlots in the Southwest.
“We are especially anticipating shipments to feedlots in Hereford, Texas, with whom we have a personal acquaintance but have not been able to reach economically,” wrote co-op marketing manager Thomas Feldmann.
Ford said the reduction in switching would lower the likelihood of its cars being vandalized in transit. The company could use one railroad to ship products from Detroit to the West Coast, from Mexico to Montana and from Tennessee to Oklahoma.
Nissan Motor Co. also likes the merger, which would cut transit times between the West Coast and Chicago by at least a day, according to Robert Frinier, vice president of logistics for Nissan North America.
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