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Santa Fe, Burlington May Sweetening Their Deal

January 23, 1995

CHICAGO (AP) _ Santa Fe Pacific Corp. said Monday it is seeking a sweeter deal from friendly suitor Burlington Northern Inc. in response to the latest offer from hostile bidder Union Pacific Corp.

The two railroad companies are discussing revisions to their $3.8 billion deal ``to make sure we have alternatives that meet all shareholders’ needs,″ Santa Fe spokeswoman Catherine Westphal said.

Santa Fe’s board of directors on Sunday rejected Union Pacific’s $3.6 billion all-cash offer, saying the proposed cash-and-stock transaction with Burlington is a better deal.

Santa Fe and Burlington are considering having Santa Fe repurchase 10 million additional shares of its own stock under certain conditions, the Wall Street Journal reported Monday. Neither Westphal nor Burlington spokesman James Sabourin would comment on the report.

The current agreement calls for Santa Fe to buy back 20 percent of its stock. The additional repurchases would increase the value of remaining Santa Fe shares to 0.43 of a Burlington share, vs. 0.4 in the current agreement, the Journal reported, citing anonymous sources familiar with the talks.

The battle between Union Pacific, the nation’s largest railroad in terms of revenues, and No. 2 Burlington, is largely for Santa Fe’s Chicago-Los Angeles line, the most direct rail route between the two transportation centers.

Union Pacific last week boosted its offer to $18.50 a share from $17.50. The company says its offer is superior because Santa Fe shareholders would not have to wait to be compensated.

But Santa Fe president Robert Krebs, in a letter Sunday to Union Pacific chairman Drew Lewis, said the $20-a-share deal with Burlington would be better for shareholders and is more likely to win government regulatory approval.

Union Pacific has proposed buying Santa Fe and placing it in a trust, which would operate it until the Interstate Commerce Commission rules on the merger.

``We’re disappointed and we think many Santa Fe shareholders will be too,″ said Gary Schuster, a spokesman for Bethlehem, Pa.-based Union Pacific. ``We think Santa Fe shareholders know a good deal when they see one.″

Burlington, based in Fort Worth, Texas, and Santa Fe, based in Schaumburg, Ill., have scheduled shareholder votes on the merger for Feb. 7.

Union Pacific sued Santa Fe on Jan. 18, seeking to invalidate Santa Fe’s ``poison pill″ takeover defense and its agreement to pay Burlington Northern a $60 million breakup fee if it backs out of the deal.

Lawyers for Santa Fe, the nation’s seventh-largest railroad, say the suit is without merit.

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