Santa Fe Industries, Inc., the parent company of the...

Sept. 27, 1983

CHICAGO -- Santa Fe Industries, Inc., the parent company of the Atchison Topeka & Santa Fe railway, and Southern Pacific Co. Tuesday announced they planned to merge.  See (BOD)

The merger will form a combined western railway system covering approximately 25,000 miles in 14 states.

The two companies will become equal subsidiaries of a new holding company, to be called Santa Fe Southern Pacific Corp.

The announcement ended intense speculation about a pending merger sparked by a halt Monday in trading of stocks of both companies on the New York Stock Exchange.

The new company will combine services in basic rail transportation, natural resources, real estate and financial services, Santa Fe Industries chairman John J. Schmidt and Southern Pacific chairman B.F. Biaggini said in a joint statement.

'The combination of the rail properties of the two companies will afford substantial economies and efficiencies and will result in a greatly improved capability to provide increased service to our customers,' the statement said.

Revenues for the new holding company could reach $6.260 billion. Total revenue for Santa Fe Industries in 1982 reached $3.159 billion and revenue for Southern Pacific was $3.104 billion.

This is the second time the Chicago-based Santa Fe and the San Francisco-based Southern Pacific have proposed a consolidation of their railroad lines. In 1980, Santa Fe proposed a $1.2 billion plan to take over Southern Pacific, but negotiations broke off before the plan could be implemented.

The merger will bring important new rail gateways for Santa Fe, including New Orleans, Memphis, Tenn., and St. Louis.

It will also allow the two companies to consolidate considerable timber, farm acreage and industrial acreage holdings. Southern Pacific currently holds 450,000 acres of timber, 160,000 acres of farmland, and 30,000 acres of industrial real estate. Santa Fe holds 655,000 acres of timberland and 22,000 acres of industrial acreage. It has no farm acreage holdings.

The merger comes close on the heels of other rail consolidations involving Union Pacific Corp. and Burlington Northern Inc., which produced the two largest western railroads.

'This agreement moves us into a position to compete effectively with those other combinations,' said Robert Gehrt, assistant vice president for public relations at Santa Fe.

Under the merger agreement, each outstanding share of Southern Pacific will be exchanged for 1.543 shares of common stock in the new holding company. Each outstanding share of common stock in Santa Fe Industries will be exchanged for 1.03 shares of holding company stock.

Presently, approximately 84.1 million shares of Santa Fe Industries stock are outstanding, as are 56.6 million shares of Southern Pacific stock.

Gehrt said the two companies plan to consummate the merger by the end of the year.

Pending final approval by the U.S. Interstate Commerce Commission, the companies will also seek to begin merger operations immediately under temporary management arrangements.

'We'll probably segregateone of the railroads under separate management pending ICC approval,' Gehrt said. 'We'll do whatever the Commission says.'

Santa Fe and Southern Pacific will each nominate one half of the membership of the board of directors for the new holding company, Gehrt said.

Headquarters for the new holding company will not be chosen until after the board is appointed. Santa Fe Industries headquarters will remain in Chicago; Southern Pacific Co. headquarters in San Francisco.