Santa Fe, Burlington Revise Merger Plan to Thwart Rival

CHICAGO —  Santa Fe Pacific Corp. and Burlington Northern Inc. said Tuesday that they have revised their $3.8-billion merger agreement in an effort to fend off a hostile bid from another railroad company, Union Pacific Corp.

Under the revision, Santa Fe could repurchase 10 million additional shares of its own stock--under certain conditions and after final approval of the merger but before its completion.

If Santa Fe were to buy back all 10 million shares, it would increase the value of its remaining stock from 0.40 to 0.4347 share of Burlington Northern stock per Santa Fe share.

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

Union Pacific downplayed the importance of the revision.

“It doesn’t say what conditions,” said Gary Schuster, a spokesman for the Bethlehem, Pa.-based company. “We think it’s financing, and we think they’d have trouble getting the financing to buy the stock.”

“I think the revised deal tilts the case slightly in Burlington’s and Santa Fe’s favor,” said James Valentine, an analyst at Smith Barney Inc. in New York.

The merger partners also announced that two shareholders holding a combined 8.1% of Santa Fe’s stock have agreed to vote in favor of the deal.

The agreement by Allegheny Corp., which owns 7.2% of Santa Fe’s stock, and George McFadden, who holds 0.9%, to vote for the merger is of less consequence than the new financial terms, he said.

Santa Fe’s board 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.