Shippers against merger with Santa Fe railroad

November 07, 1994|By New York Times News Service

CHICAGO -- Many freight shippers who rely heavily on railroads have grave doubts about whether the Atchison, Topeka and Santa Fe Railway, the object of a takeover battle, should be allowed to merge with anyone.

"We are better off being able to play them off against each other," said James Terry, manager of corporate transportation for Owens-Corning Fiberglas, which currently has the choice of using either Burlington Northern or Santa Fe lines for shipping raw materials to a factory in Amarillo, Texas.

But if the takeover battle between Burlington Northern Inc. and the Union Pacific Corp. ends with a deal for the Santa Fe Pacific Corp., rail customers' sentiment seems to be running heavily in favor of Burlington Northern. Union Pacific is already the largest railroad in the western states and it competes head-to-head with the Atchison, Topeka and Santa Fe -- the Santa Fe, for short -- on several important routes, especially from the Midwest to California.

"The idea of a larger Union Pacific scares me," said Robert A. Sieffert, transportation manager of the American-Maize Products Co., a Chicago-based producer of corn syrup and starch. "They would have a hammerlock west of the Mississippi that could improve their service but would hurt competition."

Such fears led Santa Fe's board to reject Union Pacific's $3.7 billion offer late last month and urge shareholders to back Burlington Northern's bid even though it was $500 million lower. Santa Fe executives said the Interstate Commerce Commission would never allow a deal with Union Pacific.

Union Pacific has responded that it would propose several conditions to the merger to encourage continued competition. Though it has disclosed no details, shippers assume the railroad is thinking of allowing competitors equal access to customers over some lines.

"The problem with that is that shippers have little influence over whether the other railroads negotiate the deals," said the transportation manager for one of the Midwest's largest agribusiness concerns, who insisted on not being identified.

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