Union Pacific Plans To Purchase Katy Line
OMAHA, Neb. (AP) _ Union Pacific Corp. has offered to pay about $108 million in cash and securities for the Missouri-Kansas-Texas Railroad Co., extending its own rail line to more than 25,000 miles.
In a news release issued Wednesday, Union Pacific said that a definitive merger agreement would be executed within a few days. A merger application will be filed by the end of the year with the Interstate Commerce Commission, which must approve the merger, Union Pacific said.
M-K-T, a 98-percent owned subsidiary of Katy Industries - commonly called ″the Katy″ - operates 3,100 miles of track in Kansas, Missouri, Oklahoma and Texas. It links St. Louis and Kansas City with several Texas cities, including Dallas, Fort Worth, Houston and San Antonio.
The Union Pacific System operates 22,000 miles of track in 21 states, from Chicago to the Pacific Coast.
Union Pacific said it would buy all M-K-T stock for $98 million. Minority stockholders will receive cash and Katy Industries will receive cash and securities.
The other $10 million of the purchase price will go to buy certificates issued by the M-K-T in 1958 when the railroad was reorganized, Union Pacific said.
Union Pacific spokesman John Bromley said from corporate headquarters here that the Katy line would become part of the Union Pacific System after the merger, and the M-K-T name would disappear.
Katy Industries is based in Chicago. The M-K-T is based in Dallas.
John C. Kenefick, Union Pacific System chairman, said the merger would ensure that Katy lines are ″upgraded and maintained to Union Pacific System standards.″
The combination ″would allow use of the most efficient route for handling the traffic of both roads, reducing costs and increasing operating efficiency,″ Kenefick said.
He said the two railroads now have agreements that allow them to use each others’ track along 600 miles of their routes. Kenefick said 207 miles of M-K- T’s track are an essential part of the Union Pacific’s main line between Texas and the Midwest.
Union Pacific spokesman Tom LaHood said the acquisition may lower shipping rates in some cases.
″We think that we’ll get general support from most shippers,″ LaHood said. ″It will improve the efficiency of the U.P. system, and ensure that shippers on the M-K-T will have reliable rail service for the long term.″
The acquisition is different from the company’s 1982 purchase of the Missouri Pacific Railroad because parts of the M-K-T run parallel to the Union Pacific’s Missouri Pacific track, according to company officials.
LaHood said some of the parallel tracks may become secondary main line routes available for additional rail traffic. Others may be closed, he said.