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Santa Fe Pacific Corporation
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Union Pacific Corporation
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(4) Date Filed: October 13, 1994
* Although the attached press release is being
filed as additional material pursuant to Rule 14a-6 under
the Securities Exchange Act of 1934, the filer of this additional
material does not believe that this press release constitutes
soliciting material.
[Union Pacific Corporation Letterhead]
UNION PACIFIC ANNOUNCES TENDER OFFER TO
ACQUIRE 57% OF SANTA FE
-------------------------
Seeks to Acquire Santa Fe Pursuant
to Negotiated Merger Agreement
-------------------------
Union Pacific Would Use Voting Trust
to Expedite Payment
------------------------
Bethlehem, PA, November 8, 1994 -- Union Pacific
Corporation (NYSE UNP) announced today a proposal to
negotiate an acquisition of Santa Fe Pacific Corporation
(NYSE: SFX) in a two-step transaction, using a voting
trust, in which UP would first purchase approximately 57
percent of SFP's outstanding common shares in a cash
tender offer for $17.50 per share. UP would acquire the
remaining SFP shares in a merger in which SFP
shareholders wold receive, for each SFP share, a fraction
of a UP common share having a value of $17.50, based on
the closing price of UP common stock on November 8, 1994.
UP said it will commence its tender offer shortly.
Under the UP proposal, SFP shareholders would effectively
receive approximately $10.00 per share in cash and $7.50
per share in UP stock, assuming that all SFP shares are
tendered in the offer. The proposal values SFP at $3.3
billion.
UP's proposal provides for the creation of a voting
trust, independent of UP, to hold the shares of SFP
acquired in the tender offer and merger. The voting
trust would allow SFP shareholders to receive immediate
payment for their shares in the tender offer and merger
following satisfaction of the conditions to such
transactions, rather than waiting up to several years for
Interstate Commerce Commission approval as in the
proposed merger of Burlington Northern Inc. (NYSF BNI)
with Santa Fe.
Dick Davidson, President of Union Pacific Corporation and
Chairman and Chief Executive Officer of Union Pacific
Railroad Company, in a November 8, 1994 letter to Robert
D. Krebs, Chairman, President and Chief Executive Officer
of Santa Fe Pacific Corporation, said, "Our proposed
acquisition, unlike the Burlington Northern Inc.
transaction, would not be contingent upon receipt of ICC
approval for the acquisition. . . . Our proposed
structure would enable your shareholders to receive the
entire proposed purchase price in the tender offer and
merger following satisfaction of the conditions to those
transactions without your shareholders bearing any risk
relating to ICC approval of our combination with Santa
Fe." Davidson added. "By contrast, the proposed BN
transaction provides for a delay of up to several years
in payment of any of the purchase price to SFP
shareholders and requires your shareholders to bear the
entire ICC risk."
The value of UP's proposal represents a premium of 17.6
percent over the closing price of SFP common stock on
November 8, 1994. The proposed price is also superior to
the value of SFP's existing transaction with BN based on
today's closing prices. Davidson said in his letter to
Krebs, "When your shareholders discount BN's purchase
price for the delay in payment and the ICC risk of non-
consummation of the BN transaction, the premium
represented by our proposal is even greater."
The Company said it will deliver promptly to SFP a merger
agreement modeled on the BN merger agreement. UP stated
it is prepared, in accordance with the terms of SFP's
existing merger agreement with BN, to commence immediate
negotiation of a merger agreement with SFP. Both the
cash and stock portions of the consideration to be paid
in the UP proposal would be taxable to SFP shareholders.
UP's tender offer will be subject, among other things, to
termination of SFP's merger agreement with BN in
accordance with the terms of such agreement, negotiation
of a mutually satisfactory merger agreement with SFP, the
shareholders of SFP not having approved the merger
agreement with BN, at least a majority of the SFP shares
being validly tendered and not withdrawn prior to
expiration of the offer, and the issuance of a favorable
ICC staff opinion regarding the terms of the proposed
voting trust. Davidson said, "On this separate ICC
matter of approval of the voting trust agreement, we are
confident that a favorable ICC staff opinion will be
forthcoming."
The proposed merger would also be subject, among other
things, to the approval of SFP shareholders. UP's
proposal is not subject to a due diligence or financing
condition or to approval of UP's shareholders.
In his letter to Krebs, Davidson said, "You have
repeatedly advised UP that if it make[s] a proposal at a
fair price and with an adequate provision for a voting
trust that would substantially eliminate the regulatory
risk for SFP shareholders, your Board 'would consider
that proposal in light of its fiduciary duties.' We
hereby submit just such a proposal."
Davidson also advised Krebs that, alternatively, if SFP's
Board so prefers, UP would be prepared to proceed with
its previous proposal to negotiate a tax-free merger,
without the use of a voting trust, in which SFP
shareholders would receive UP shares having a value of
$20 per SFP share, based on market prices at the time
such proposal was made. "The choice is up to your
Board," said Davidson. That alternative proposal would
value SFP at $3.8 billion, but payment would not occur
until after ICC approval of a UP/SFP combination, which
would require two years or more.
Attached is the full text of a letter from UP to Mr.
Krebs on the proposal.
[UNION PACIFIC CORPORATION]
November 8, 1994
Mr. Robert D. Krebs
Chairman, President and CEO
Santa Fe Pacific Corporation
1700 East Golf Road
Schaumburg, IL 60173
Dear Rob:
You have repeatedly advised Union Pacific Corporation
that if it "make[s] a proposal at a fair price and with
an adequate provision for a voting trust that would
substantially eliminate the regulatory risk for SFP
shareholders," your Board "would consider that proposal
in light of its fiduciary duties." We hereby submit just
such a proposal. We insist that you and your Board of
Directors, consistent with your fiduciary obligations and
in accordance with the terms of your existing merger
agreement with Burlington Northern Inc., give careful
consideration to this proposal. In light of the November
18 date of your shareholders' meeting to consider the BN
merger, time is of the essence.
Using a voting trust, we propose acquiring all shares of
Santa Fe Pacific Corporation's common stock in a two-step
transaction. First, we would purchase approximately 57
percent of the shares outstanding on a fully diluted
basis in a cash tender offer for $17.50 per share. We
would then acquire the remaining SFP shares in a merger
in which your shareholders would receive, for each SFP
share, a fraction of a UP common share having a value of
$17.50, based on the closing price of UP common stock on
November 8, 1994. The stock portion of the consideration
represents a ratio of .354 of a UP share for each SFP
share.
Your shareholders would effectively receive approximately
$10.00 per share in cash and $7.50 per share in UP stock,
assuming that all SFP shares are tendered in the offer.
Both the proposed cash and stock portions of the
considerations would be taxable to SFP shareholders.
The value of our proposed transaction represents a
premium of 17.6 percent over the closing price of SFP
common stock on November 8, 1994. Based on today's
closing prices, the price would also be superior to the
value of the BN transaction that has been endorsed by
your financial advisors as fair to your shareholders. As
discussed below, our price represents a premium to that
of the BN transaction, even without factoring in the
uncertainty of Interstate Commerce Commission ("ICC")
approval of the BN transaction and the delay in payment
of the purchase price under that proposal.
Our proposed acquisition, unlike the BN transaction,
would not be contingent upon receipt of ICC approval for
the acquisition. At the time we consummated the tender
offer and the merger, we would place the shares of SFP
common stock purchased by us into a voting trust that
would be independent of UP.
Our proposed structure would enable your shareholders to
receive immediate payment of the entire purchase price in
the tender offer and merger following satisfaction of the
conditions to those transactions, without your
shareholders bearing any risk relating to ICC approvals
of our combination with SFP. By contrast, the proposed
Burlington Northern transaction provides for a delay of
up to several years in payment of any of the purchase
price to SFP shareholders and requires your shareholders
to bear the entire ICC risk.
When you shareholders discount BN's purchase price for
the delay in payment and the ICC risk of non-consummation
of the BN transaction, the premium represented by our
proposal is even greater.
We will be commencing our tender offer shortly. We also
will be delivering to you promptly a proposed merger
agreement modeled on your agreement with BN. UP is
prepared, in accordance with the terms of your existing
merger agreement with BN, to commence immediate
negotiation of our proposed merger agreement.
Our tender offer will be subject, among other things, to
termination of your merger agreement with BN in
accordance with the terms of such agreement, negotiation
of a mutually satisfactory merger agreement with SFP, the
shareholders of SFP not having approved the merger
agreement with BN, at least a majority of the SFP shares
being validly tendered and not withdrawn prior to
expiration of the offer, and the issuance of a favorable
ICC staff opinion regarding the terms of our proposed
voting trust. On this separate ICC matter of approval of
the voting trust agreement, we are confident that a
favorable ICC staff opinion will be forthcoming.
The proposed merger would also be subject, among other
things, to the approval of SFP shareholders. Our
proposal is not subject to due diligence or financing
condition or to approval of UP's shareholders.
Our willingness to pay your shareholders prior to ICC
review and approval of the acquisition reflects our
belief that we will be able to obtain ICC approval and
our willingness to negotiate acceptable conditions
necessary for such approval. We remain ready to discuss
with you your concerns relating to ICC approval of the
combination of our two companies.
Please be advised that if your Board would prefer to
discuss our previous proposal to negotiate a tax-fee
merger, without the use of a voting trust, in which SFP
shareholders would receive UP shares having a value of
$20 per SFP share based on market prices at the time of
such proposal, we remain willing to proceed on that
basis. The choice is up to your Board.
Sincerely,
Dick Davidson
President,
Union Pacific Corporation
Chairman and CEO,
Union Pacific Railroad Company
cc: Board of Directors
Santa Fe Pacific Corporation
Because of fluctuations in the market value of Union
Pacific common stock and Burlington Northern Inc. common
stock, there can be no assurances as to the actual value
that Santa Fe shareholders would receive pursuant to the
second-step merger contemplated by the new Union Pacific
proposal or pursuant to the Santa Fe/Burlington Northern
Inc. merger.
This announcement is neither an offer to sell nor a
solicitation of offers to buy any securities which may be
issued in any merger or similar business combination
involving Union Pacific and Santa Fe. The issuance of
such securities would have to be registered under the
Securities Act of 1933 and such securities would be
offered only by means of a prospectus complying with the
requirements of such Act.
