The Biggest Merger

Before the Interstate Commerce Commission last week was a plan for the biggest railroad merger ever proposed. Three major Western roads, the Great Northern, the Northern Pacific, and the Chicago, Burlington & Quincy (98% owned by the G.N. and the N.P.), petitioned the ICC to allow them to merge into a single, vast new system to be called the Great Northern Pacific & Burlington. In addition, the short (936 miles) Spokane, Portland & Seattle Railway, built and wholly owned by the N.P. and the G.N., would be operated after the merger under a ten-year lease, presumably would then be absorbed by the giant as well. With 24,728 miles of track, the new line would be the longest in the U.S. and would rank second in revenues only to the Pennsylvania Railroad, which in 1960 had revenues of $844 million, v. some $674 million that it is estimated the proposed G. N. P. & B. might have earned that year.

The G.N. and the N.P. have tried to get together three times previously--in 1893, 1901 and 1930--but were blocked each time by antitrust laws or ICC rulings. Thanks to ICC's recent change of heart toward encouragement of railroad mergers, the new proposal seems to have a good chance.

Spanning 17 States. Five years in the planning, the proposed merger would create an integrated railroad empire spanning 17 states, stretching from Chicago and St. Louis to the West Coast (see map). Through subsidiaries, the Great Northern Pacific would also connect with the Gulf of Mexico at Galveston. Texas, via the Colorado & Southern, which is 75% owned by the Burlington and which, in turn, is the sole owner of the Fort Worth & Denver Railway.

The Great Northern Pacific would inherit extensive trucking services owned by the separate railroads, as well as the N.P.'s oil-rich land holdings in Montana and North Dakota, and would have combined assets of $2.8 billion. Under the proposed merger terms. N.P. stockholders would get one share in the new company for each share held; G.N. stockholders would get the same, plus one-half share of preferred; Burlington stockholders would get 3 1/4 shares of the new stock for each share held.

Saving $43 Million. If ICC and stockholders approve, the lines are ready to begin merging within three months, estimate that within four years they will be saving through the integrated operations some $43 million before taxes--and be providing faster, more economical service. The ICC will receive statements next month from those who want to offer another side of the story.

On that side, the railroad union protests are likely to be vociferous. Last week the Railway Labor Executives' Association, representing railroad union bosses, urged the President and ICC to bar all railroad mergers for the time being, estimating that some 200,000 workers of the 700,000 in the industry will be displaced by the mergers currently pending and proposed. The Great Northern Pacific's backers are ready with an answer: in their ICC petition they estimate that the merger will abolish over five years only 5,100 of the lines' present 64,000 jobs, point out that each year some 4,000 jobs open up through retirements, resignations and deaths.

Merger plans were ordered drafted last week by the directors of two other big railroads: the Chicago & North Western Railway and the Chicago, Milwaukee, St. Paul & Pacific. If merged, the two lines would serve 15 states, create the second longest U.S. railroad, with 21,325 miles of track, and save an estimated $40 million in joint operating economies. But a group of Milwaukee Road directors led by Executive Committee Chairman J. Patrick Lannan oppose the terms of the proposed stock swap as too little for Milwaukee Road stockholders. They would get one new share for each owned, while C. & N.W. holders would get 1 1/4 to 1 1/2 shares for each owned. The five dissident directors have been buying up Milwaukee Road stock, now have 250,000 shares of the 2,123,000 outstanding, and threaten a proxy fight if the deal as proposed goes through.

This file is automatically generated by a robot program, so reader's discretion is required.