Union Pacific Corp.’s proposed $5.4 billion acquisition of Southern Pacific Corp. gained final approval from federal regulators, clearing the way for the creation of the largest railroad in North America.
The federal Surface Transportation Board issued a 290-page report upholding a unanimous vote by the board’s three commissioners on July 3 approving the merger. The STB also approved more than 30 minor conditions the commissioners had attached to their approval.
“Any competitive harms will be heavily outweighed by the broad-based, positive effects of the merger,” the board said in the report.
Larry Kaufman, a spokesman for Southern Pacific, said the companies would likely close the transaction when the board’s approval becomes effective in 30 days. Integrating the two companies is expected to take about two years.
The merger could be delayed if opponents convince a federal appeals court judge to push back the approval’s effective date. Several opponents, including Conrail Inc., Kansas City Southern Industries Inc. and the U.S. Department of Justice, have said they are considering an appeal of the STB’s approval.
“If you’ve been fighting this thing for 12 months, you’ve got nothing to lose,” said Keith Shugarman, a Washington, D.C.-based antitrust lawyer.
If the merger were delayed, Union Pacific and Southern Pacific would likely ask that the opponents be required to post a bond of at least $100 million to cover any losses due to the delay.
“Southern Pacific has serious liquidity problems,” Kaufman said. “The longer we wait, the worse it’s going to get.”
Shares of Southern Pacific closed unchanged at 27 1/2. Union Pacific rose 1/2 to 71.
It’s unlikely an appeal would succeed in blocking the merger. The STB was given absolute authority to approve railroad mergers by Congress last year, making most judges reluctant to overturn its rulings, analysts said.
The STB’s approval requires that the companies grant additional rights to use certain tracks to competitors including Burlington Northern Santa Fe Corp., which already has been promised about 4,000 miles of track rights by Union Pacific once the merger is complete.
Under the July ruling, Union Pacific and Southern Pacific must allow Burlington Northern to run its trains on all routes where competition would be reduced to one railroad from two as a result of the merger.