Curious-SP/ATSF MERGER VS. BN/ATSF

[Anonymous]

Greatings,

I was wondering why the SP/ATSF merger did not go through and the BN/ATSF did.

Any insight or history on the subjects?

Thanks,

Mark in Texas

[kenneo]

Real simple. ICC (now the STB) said NO! SP and ATSF were considered to be competitors and combining th two was considered to be a monopoly.

Now, why did the SP fail as a business? Well, when the two roads decided to combine, ICC rules required that both railroads to be kept separate and operated that way. The non railroad companies could combine and take one of the railroads, so Santa Fe Inc and SP inc combined and took ALL of the assets of the SP that were not needed to run the railroad - Land Grant lands, oil lands, forest lands, pipelines, trucks, on and on. So, when the ICC said NO, the SP was having a real problem doing it on its own. That's how the DRGW was able to buy it, and, in the end, how the UP got the SP and DRGW, SSW, CRIP and CEI for almost free.

BN/ATSF? Considered an End-To-End merger, therefore, not a monopoly.

Not a monopoly? Really? It takes all kinds, i guess.

[mudchicken]

Add to that ,with Shouldn't Paint So Fast (SPSF):

(1) An executive level JackA*ss spouting off future plans about the railroad in Traffic World Magazine that ticked off just a few in the Justice Department (His future immediately went into the tank)

(2) Mysteriously the sitting ICC commissioners that killed SPSF with the exception of Gradison wind up on the UPRR board of directors 2 years later.

Kenneo: Real estate holdings & property management, not land grants....the company that was SP Real estate and SFLI is now the mismanaged mess known as Cattellus (BNSF ironically fired Catellus in 1991 and hired Staubach to manage their real estate after costing BNSF dearly, something not mentioned much by Trains or others....Not as much a debacle as BN's "Glacier Park", but still pretty ugly)

[TH&B]

Don't know much about the politics but if you think pumkin orange is bad wait til you see the kodachrome red and yellow,... yuk!!!! good enough reason for me (I miss the grey SP units) UP yellow is ok I guess.

[kenneo]

QUOTE: Originally posted by mudchicken

Add to that ,with Shouldn't Paint So Fast (SPSF):

(1) An executive level JackA*ss spouting off future plans about the railroad in Traffic World Magazine that ticked off just a few in the Justice Department (His future immediately went into the tank)

(2) Mysteriously the sitting ICC commissioners that killed SPSF with the exception of Gradison wind up on the UPRR board of directors 2 years later.

Kenneo: Real estate holdings & property management, not land grants....the company that was SP Real estate and SFLI is now the mismanaged mess known as Cattellus (BNSF ironically fired Catellus in 1991 and hired Staubach to manage their real estate after costing BNSF dearly, something not mentioned much by Trains or others....Not as much a debacle as BN's "Glacier Park", but still pretty ugly)

All of the remaining land grant lands in SP's hands when they were transferred to the Santa Fe Pacific, Inc., were in the Real Estate Division of the holding company. SP at one time had all of its "parts" within the RR corporate structure, but for tax reasons split the railroad into its parts and the holding company (Southern Pacific Company) had the Southern Pacific Transportation Company (the railroad), Southern Pacific Pipeline Company, Southern Pacific Real Estate Company, and so on. All of these separate parts except for the SPTCo went to the ATSF and were folded into the Santa Fe Pacific. It was all of these other parts that kept the railroad running.

The UP had been trying to merge with the SP for nearly 100 years, and finally did it. At the turn of the 1900's, the SP, UP and other roads were owned by Harriman, and the then new ICC wouldn't let the mergers happen. Durrant Lives!

[Anonymous]

SPSF would have been the biggest merger before BNSF- UPSP
but some people like the government didnt like that idea

[espeefoamer]

SPSF didn't happen because UP didn't want it to.There were a lot of yellow yachts in the ICC marina the morning after SPSF was denied. The UP/SP "merger"took place becauseof UP policy,"You will be assimilated.Resistance is futile."[:(]

[Anonymous]

It is interesting that kennco brought up the natural resources of the railroads. One thing the BN did was to spin off the natural resources into a separate company a number of years before the ATSF merger.

It was very controversial in the business community at the time. In order to split the company old bonds constructed by JP Morgan had to be circumvented. The bond holders got screwed and the railroad got screwed. The new natural resource company spun off with no debt, the debt was left with the railroad. Much of the debt came about from the purchase of oil assets and a pipeline company called El Paso Oil among others. The railroad was left so much debt it was predicted that bankruptcy might follow.

Ironically the railroad survived and prospered and El Paso Oil met hard times. The Federal Government made pipelines into common carriers. That meant that the pipeline had to transport products from anyone for a fee. Before pipeline companies would purchase the product and add a percentage onto the price to cover the cost of transport. The pipelines were taking advantage. Natural gas was the example I remember. The pipelines would import very expensive natural gas from the middle east add the percentage and make a huge profit. Now power companies buy the least expensive gas they can find and add the same percentage for transport.

Of course that was the perion where oil executives were running the BN.

[doneldon]

kenneo got it just right, with a little bit of lobbying by the UP thrown in for good measure. I come from a long AT&SF family so I followed the debacle quite closely. Frankly, I was surprised the ICC let the ATSF/SP merger get as far as it did!

Why the BN+SF merger didn't seem monopolistic to the ICC is beyond me. The railroads are anything but end to end, and even end to end there's more than a whiff of monopoly involved.

Act three is still to be played. That's where the BNSF merges with somebody like the Norfolk and Western and we see what a really huge railroad is all about. Of course that will force the UP to eat some other eastern railroad and we'll have two transcontinental behemoths that are bigger than a lot of good-sized countries. I wonder what our government will do then, especially with money controlling Washington even more than usual.

[fuzzybroken]

BN/ATSF was more of an end-to-end merger, not much overlap. SP/ATSF had a lot of common territory, and would have likely abandoned lots of trackage. I, for one, actually liked the red/yellow/black "Kodachrome" SPSF paint scheme, especially over the SP's grey/red/dirty paint scheme. ;)

One thing I have also noticed it that prior to SPSF, a lot of RR mergers were of the "common territory" variety, e.g. ACL/SCL, Conrail (and Penn Central before that), BN, IC/GM&O, to name a few. Since then, most mergers have been mostly end-to-end, such as CP/SOO (technically a merger) and D&H, CN/WC/IC, KCS/MidSouth/GWWR/TexMex plus TFM, the Conrail split-up, BNSF, etc.

-Mark Hintz
http://www.geocities.com/fuzzybroken

[Anonymous]

Why was BNSF allowed while the SPSF was rejected? It's all politics.

In today's "corporate" world, bigger is better, regardless of what happens to the consumer. Look around, how many mega-mergers have happened recently? Did we really need ExxonMobil?

The other part of the equation is that the STB is a castrated ICC, and many have commented that it's a rubber stamp for almost any merger. In other arenas (business), the FTC (I think it's them) regulates mergers.

Yet, when you look at the overlap of the SP and the ATSF, there was a bunch, and I mean a bunch, in California, Arizona, and a little in NM. Texas, well, look at the gulf coast, down around Houston/Galveston was pretty much all SP and ATSF.

Simply put, the concessions required by the ICC (not to mention the comments made by someone at SPSF) would have changed the nature of the west, bringing DRGW into Nor Cal and Oregon (remember the Modoc line, that was to go, IIRC, to the DRGW for access into the Northwest) and I personally don't think that the market was ready for such a large RR merger.

So, Roseville would've been one end of the DRGW b/c it was part of the concession. You'd have three class One's in Sacramento. Not bad.

Politics killed it.

The political winds shifted and after the UP fought bitterly for ATSF (imagine that one), the BNSF won out and I don't know why, seemed like a bad deal for competition. I guess they wanted to compete with the larger Uncle Pete and of course the BNSF merger forced UP to consume SP.

I digress...but it was politics that killed SPSF.

art

[JoeUmp]

I always believed that it was UP$ that prevented the SFSP merger. Mean while the UP was quietly gobbling up all the smaller caompetitors it could. And they are now larger than they complained abour SFSP.

Thank GOD for the protection we get from congress and the UP.

[Anonymous]

Ok, there are some very interesting theories and comments why the SPSF (is that correct...
seems I remember seing a pic. of a locomotive actually painted that way) never happened.
What I'd like to know is this... back in the very early 90's, I seem to recall that Conrail was
interested in buying out (or merging with) the SP... creating our nations first "real" transcontinental railroad... and essentially spliting the country in two. Am I mistaken on this, and if not... what ever happened to THAT deal?

[fuzzybroken]

QUOTE: Originally posted by Paul112554

Ok, there are some very interesting theories and comments why the SPSF (is that correct...
seems I remember seing a pic. of a locomotive actually painted that way) never happened.
What I'd like to know is this... back in the very early 90's, I seem to recall that Conrail was
interested in buying out (or merging with) the SP... creating our nations first "real" transcontinental railroad... and essentially spliting the country in two. Am I mistaken on this, and if not... what ever happened to THAT deal?

SPSF did actually paint up at least a couple engines and at least one caboose for publicity photos.

I also remember the Conrail bid for SP. I think the reason it died was that SP just plain wasn't interested. Several years earlier the Seaboard System had also proposed a merger with SP (Seaboard Southern Pacific... has a nice ring to it?) but that idea died when the CSX consolidation happened with Chessie System.

-Mark
http://www.geocities.com/fuzzybroken

[kenneo]

The SCL/Family Lines had become a reality by the time of the proposal to merge the SE raods with SP. The Chessie buy-out (read merger, sorry) came after the failure of the merger plan. It failed because there were two CEO's that had to have everything their own way and neither could agree on what that way was. Soooooooo........

I was hopeing to be able to ride Portland to Wash., D.C. on my Home Road AMTRAK Pass. Oh, well.

[Anonymous]

I wonder if there is any mechanism by which very, very, very bad decisions by the STB can be overturned and all that is currently wrong can be made right again?

[Anonymous]

Ya well if it wasn't for the UP/SP MELTDOWN screwup the STB would have allowed the BNSF/CP merger to go forth. And lot of other Mergers too.

[Anonymous]

oh ya stupid me again!

[Anonymous]

Being from KS, the heart of the ATSF, the SPSF combo would have killed the Golden St route as that traffic would have been easily shifted to Santa Fe's high speed mainline out of Kansas City westward . The reason the golden St route is still alive is the ICC saying no to SPSF in 1986

[Anonymous]

The real truth behind the SPSF merger is quite simple,there would be NO competition from other railroads.Conrail and the UP were against it,though Conrail NEVER had talks with the SP. The Santa Fe was loosing alot of money,and needed a partner to help them out.In 1983 the Santa Fe and the SP had renewed their talks and decided to start a new company called SPSF CORP. Sp had VERY valuable assests in real estate,oil, and communications. S. California was a " country club" to both railroads,and in the eyes of SP president Biaggini,he suggested that the ICC " owed us one".In July 1986,it was denied,due to it being anti-competitive.In Sept.1987,it was ordered that the SF divested itself of the SP railroad. Phil Anschutz,owner of the DRGW through his fortunes in oil,was a big opponent of the SPSF merger,and since he was the president of the DRGW,he was interested in the SP,despite unsuccessful talks to merge with the KCS. With large loans from New York banking houses,and a large dose of junk bonds,he got the SP, Though he did have to sell off large quantities of railroad properties in a short time.He used very little of his own capitol. All this info was found in books called "Railroad Mergers" by the Simmons-Boardman publishing company,and "SPSF 1986-1987 MOTIVE POWER REVIEW, by Joseph W. Shine,and my own observations on what I was told,read, and given in official documents by former Santa Fe and SP employees,while living in S.California for 10 years from 1984-1994.They are very interesting books, and you'd be amazed at what REALLY went on behind the closed doors at the merger talks. As for the BN and the Santa Fe,take the same senario and put BN where the SP was and exclude the rest of what has been written.[:)]

[MP57313]

QUOTE: Originally posted by fuzzybroken
SPSF did actually paint up at least a couple engines and at least one caboose for publicity photos.

Also in Los Nietos/Santa Fe Springs, CA, a new connector track was under construction in the southwest corner of the diamond between SP and ATSF. The construction was promptly halted when the merger was called off. Remnants are still there today...

[PNWRMNM]

Mark,

I worked for SP at the time. You are right on as to Sprint, it needed massive investment to succeed. That sale was one of Biagginni's few good moves.

As I recall Ticor generated a lot of cash.

Mac