Proposed BNSF/CN combination update - Burlington Northern Santa Fe Corp. and Canadian National Railway - Brief Article

Railway Track and Structures, Feb, 2000

The Surface Transportation Board said that it will hold the Burlington Northern Santa Fe Corp. and Canadian National Railway Co.'s proposed merger to a higher standard than others before it, due in part to Union Pacific's problems after it took over Southern Pacific and difficulties with the Norfolk Southern and CSX Transportation break up of Conrail. The STB expects the companies to submit evidence in their application on the "cumulative impacts and crossover effects" that are likely to occur if the merger is approved.

"Given the recent experience with post-merger rail service disruptions, the applicants also will be expected to include in their application evidence on likely effects on rail service of any action the Board may take," the STB statement said.

Canadian Pacific, CSXT, NS and UP said in an open letter to railroad customers that the companies have "serious concerns with the potential impact of the BNSF/CN merger on the future structure of the rail industry." The letter, signed by the companies' ceos, goes on to say that "another wave of mergers would be premature" at this time.

BNSF/CN released a statement, in reaction to the open letter, saying that the concerns of the four railroads voiced to shippers about the proposed merger are both self-serving and not in the best interests of the shippers.

"Our combination is both different from other recent railroad consolidations and is low-risk. It is essentially a no-overlap, end-to-end joining of two companies that share a common technology platform. In the future, BNSF and CN will be separate operating companies fully committed to meeting customer needs over a common network," said Robert D. Krebs, chairman and ceo of BNSF. "This is not a situation where a parallel com-petitor is eliminated, an existing railroad is divided, or key personnel are eliminated. There is no reason to delay our customers' receipt of the benefits of our transaction."

The two companies have filed a registration statement related to securities to be issued in connection with the merger with both the U.S. Securities and Exchange Commission and the Canadian Securities Administrators. The registration statement can be found both on the SEC's website at www.sec.gov, and on the CSA's website, www.sedar.com.