Conrail, KCS enter the UP-SP merger debate - Kansas City Southern and Conrail are among the railroads that are voicing opposition to the acquisition of Southern Pacific by Union Pacific - Brief Article

Railway Age, Feb, 1996

It's a high-stakes game that's far more than a "game"--the increasingly strident debate in the West stirred up by the proposed Union Pacific acquisition of Southern Pacific.

UP-SP has reached accommodation with Burlington Northern Santa Fe in an agreement that will extend BNSF's territorial reach through trackage rights and line acquisition arrangements (much as BN and Santa Fe reached agreement with UP and SP when the BNSF merger was pending). And as of late January, UP-SP seemed close to an agreement with Illinois Central concerning gateway and interchange arrangements that would presumably ease IC's mind about conditions that might exist if the UP-SP combination is approved later this year. IC has taken a rather low-key approach to the situation, while at the same time making its concerns clearly known.

The most vociferous railroad opposition to UP-SP came first from Kansas City Southern and then from Conrail, which wants to move west all the way to El Paso

For its part, UP seemed to be dropping hints that if conditions it regards as onerous should be attached to the merger it might well walk away. That stirred memories of the UP-Rock Island case of many years ago; then, a deteriorating Rock Island was left hanging while the Interstate Commerce Commission held onto the case for years, with the result that UP walked away when it finally did win ICC approval. That kind of delay is not permissible today, and ICC's successor, the Surface Transportation Board, is expected to issue its decision in late summer. But the walk-away option will be open, and if UP chose to exercise it SP would be the one left hanging, in less than glowing health although in far better shape than the old Rock Island was.

Both KCS and Conrail have now indicated their intent to participate in the proceedings. CR's statement said it would file comments opposing the consolidation--the deadline for these filings is March 29--unless the merger "is conditioned on the divestiture and sale of certain lines now owned and operated in the Gulf/Eastern Region by the Southern Pacific Rail Corp. to qualified buyers."

Conrail last month was telling shippers in the Gulf Coast area what it planned to make in the way of improvements should it be successful in gaining interest. Countering, the would-be merger partners suggested that customers know UP and SP, they know what UP and SP can do, and they don't know what capabilities "invaders" can really bring to the region. The term "carpetbaggers" has been heard.