SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13E-3
Rule 13e-3 Transaction Statement (Pursuant to Section 13(e) of
the Securities Exchange Act of 1934)
Amendment No. 4
Chicago and North Western Transportation Company
(Name of Issuer)
Chicago and North Western Transportation Company
Union Pacific Corporation
Union Pacific Holdings, Inc.
UP Rail, Inc.
(Name of Person(s) Filing Statement)
Common Stock, Par Value $.01 Per Share
(Title of Class of Securities)
167155 10 0
(CUSIP Numbers of Class of Securities)
Robert Schmiege Richard J. Ressler, Esq.
Chairman of the Board and Chief Assistant General Counsel
Executive Officer Union Pacific Corporation
Chicago and North Western Martin Tower, Eighth and
Transportation Company Eaton Avenues
165 North Canal Street Bethlehem, Pennsylvania
Chicago, Illinois 60606 18018
(312) 559-7000 (610) 861-3200
(Name, Address and Telephone Number of Persons Authorized
to Receive Notices and Communications on Behalf of Person(s)
Filing Statement)
with copies to:
Paul J. Miller, Esq. Paul T. Schnell, Esq.
Sonnenschein, Nath & Rosenthal Skadden, Arps, Slate, Meagher & Flom
8000 Sears Tower 919 Third Avenue
Chicago, Illinois 60606 New York, New York 10022
(312) 876-8000 (212) 735-3000
This Amendment No. 4 amends and supplements the Rule 13e-3
Transaction Statement relating to the tender offer by UP Rail,
Inc. (the Purchaser ), a Utah corporation and a wholly owned
subsidiary of Union Pacific Holdings, Inc., a Utah corporation
("Holdings"), and an indirect wholly owned subsidiary of Union
Pacific Corporation, a Utah corporation ( Parent ), to purchase
all outstanding shares of Common Stock, par value $.01 per share
(the Common Stock ), of Chicago and North Western Transportation
Company, a Delaware corporation (the Company ).
Unless otherwise indicated herein, each capitalized term
used but not defined herein shall have the meaning assigned to
such term in Schedule 13E-3 or in the Offer to Purchase referred
to therein.
ITEM 16. ADDITIONAL INFORMATION.
The information set forth in Item 16 of Schedule 13E-3 is
hereby amended and supplemented by the following information:
As previously disclosed in the Offer to Purchase under the
caption "SPECIAL FACTORS--Interests of Certain Persons in the
Transaction," the Company and UPRR have offered three-year
employment agreements to certain executives which, if accepted by
the executives, will replace the Change of Control Employment
Agreements which the executives now have with the Company. In
addition, in order to implement the terms of the severance
arrangements described in the Offer to Purchase, the Company,
UPRR and CNW Railway have offered severance agreements to certain
executives who have Change of Control Employment Agreements with
the Company. A form of the employment agreements and severance
agreements being offered are attached hereto as Exhibits (g)(10)
and (g)(11), respectively, and are incorporated herein by
reference.
On April 4, 1995, Parent, UPRR, MPRR and the Company
submitted to the ICC a petition for a determination that the
terms of the Merger are just and reasonable. A copy of such
petition is attached hereto as Exhibit (g)(12) and incorporated
herein by reference.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
(g)(10) Form of employment agreement to be entered into by
the Company, UPRR and certain executives.
(g)(11) Form of severance agreement to be entered into by
the Company, UPRR, CNW Railway and certain
executives.
(g)(12) Petition for a determination that the terms of the
Merger are just and reasonable, filed with the ICC
on April 4, 1995, by Parent, UPRR, MPRR and the
Company.
SIGNATURE
After due inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this
statement is true, complete and correct.
Dated: April 6, 1995 CHICAGO AND NORTH WESTERN
TRANSPORTATION COMPANY
By: /s/ Ronald J. Cuchna
SIGNATURE
After due inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this
statement is true, complete and correct.
Dated: April 6, 1995 UNION PACIFIC CORPORATION
By: /s/ Carl W. von Bernuth
SIGNATURE
After due inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this
statement is true, complete and correct.
Dated: April 6, 1995 UNION PACIFIC HOLDINGS, INC.
By: /s/ Carl W. von Bernuth
SIGNATURE
After due inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this
statement is true, complete and correct.
Dated: April 6, 1995 UP RAIL, INC.
By: /s/ Carl W. von Bernuth
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
(g)(10) Form of employment agreement to be entered into
by the Company, UPRR and certain executives.
(g)(11) Form of severance agreement to be entered into
by the Company, UPRR, CNW Railway and certain
executives.
(g)(12) Petition for a determination that the terms of
the Merger are just and reasonable, filed with
the ICC on April 4, 1995, by Parent, UPRR, MPRR
and the Company.
EMPLOYMENT AGREEMENT
AGREEMENT made and entered into by and between
Chicago and North Western Transportation Company ("CNW"),
Union Pacific Railroad Company (the "Company") and
___________________ (the "Employee") dated this 3rd day
of April, 1995.
W I T N E S S E T H :
WHEREAS, Employee is presently employed by CNW
as an executive;
WHEREAS, CNW, Union Pacific Corporation and UP
Rail, Inc. have entered into an Agreement and Plan of
Merger dated as of March 16, 1995 (the "Merger
Agreement") under which CNW will merge with a subsidiary
of Union Pacific Corporation; and
WHEREAS, the Employer (as defined in Section 1
hereof) is desirous of assuring the continuing employment
of Employee as an executive of the Employer after the
date of consummation of the merger contemplated in the
proposed Merger Agreement (the "Merger Date") and the
Employee is desirous of such continuing employment;
NOW, THEREFORE, in consideration of the mutual
promises and agreements contained herein, the parties
hereto agree as follows (this Agreement to be binding
upon the parties upon its execution, but to become
effective immediately upon the later of such execution or
the consummation of the "Offer" (as defined in the Merger
Agreement)):
1. Employer. In this Agreement the term
"Employer" shall mean CNW from the date hereof through
the Merger Date (or through the end of the Term, if the
Merger Date shall not occur prior thereto) and shall mean
the Company or a Company-designated affiliate (including
CNW) beginning the day immediately following the Merger
Date.
2. Term. Employer hereby agrees to continue
employing Employee and Employee agrees to be so employed
for a period commencing as of the date hereof (the
"Effective Date") and continuing through the third
anniversary of the Merger Date (the "Term") or such
earlier termination date as hereinafter set forth (the
"Employment Period").
3. Duties. During the Employment Period
hereof, and excluding any periods of vacation or sick
leave to which the Employee is entitled or periods of the
Employee's physical or mental incapacity, Employee agrees
to devote the Employee's full time and best efforts in
the discharge of the duties assigned by the Employer. It
shall not be a violation of this Agreement for the
Employee to serve on corporate, civic or charitable
boards or committees, so long as such activities are
consistent with the policies of the Employer (as from
time to time amended) and do not interfere with the
performance of the Employee's duties in accordance with
this Agreement.
4. Compensation.
(a) As remuneration for the full-time
services to be rendered to the Employer during the
Employment Period, Employee shall be paid annually no
less than (i) the Employee's annual base salary in effect
immediately prior to the date hereof and (ii) the
Employee's "Annual Bonus Amount", which shall be equal to
the bonus paid to the Employee with respect to 1994
(which is agreed to have been 73% of the possible maximum
bonus for the Employee for such year). Annual base
salary shall be paid in a manner and frequency consistent
with the pay practices of the Employer. For calendar
year 1995, the Annual Bonus Amount payable to the
Employee by the Employer shall be reduced by any bonus
paid to the Employee by CNW attributable to performance
in 1995 prior to the Merger Date.
(b) After January 1, 1996, (i) Employee
shall have an opportunity to receive such benefits as are
provided to other comparable employees of the Employer
performing similar services, including, but not limited
to, if applicable, group life and health insurance
benefits, pension and profit sharing benefits, deferred
compensation benefits, vacations and expense
reimbursements, and Employee shall be given service
credit under each of Employer's benefit plans for all
years of service for which Employee had received credit
under the comparable plans of Chicago and North Western
Railway Company, subject to reduction for any benefits to
which such employee is entitled from Chicago and North
Western Railway Company under its similar benefit plans
(the similar benefit plans with respect to the Pension
Plan for Salaried Employees of Union Pacific Corporation
and Affiliates being the Chicago and North Western
Transportation Company Supplemental Pension Plan and the
Chicago and North Western Transportation Company Profit
Sharing and Retirement Savings Program).
5. Payments on Termination of Employment.
Notwithstanding the provisions of Section 2 hereof,
Employee's employment hereunder may be terminated during
the Employment Period upon the occurrence of any of the
events described in clauses (i) through (vi) of this
Section 5. If the termination event is described in
clause (i) or (iv), the Employer shall pay to the
Employee, within the five days immediately following the
date of such termination of employment, a lump sum amount
equal to the present value (calculated using a discount
rate based on 120% of the applicable Federal rate under
Section 1274(d) of the Internal Revenue Code of 1986, as
amended from time to time) of the aggregate base salary
and bonus otherwise payable to the Employee through the
end of the Term under this Agreement (such base salary
amount to be calculated using the greater of the base
salary in effect immediately prior to the date hereof or
the base salary in effect immediately prior to such
termination event and such bonus amount to be calculated
using the deemed annual bonus determined under Section
4(a) hereof). If the termination event is described in
clause (ii), (iii), (v) or (vi), the Employee (or the
Employee's estate, in case of clause (ii)) shall forfeit
the Employee's right to any and all compensation and
benefits the Employee would have been entitled to receive
pursuant to this Agreement with respect to any employment
period which would otherwise have followed the date of
such termination, but, except for rights or benefits
under the Employee's Change of Control Employment
Agreement dated as of December 20, 1994, Employee shall
not forfeit any rights or benefits Employee would
otherwise receive or retain in the absence of this
Agreement. The above-referenced events of termination
are as follows:
(i) At any time by the Employer,
without cause (as defined in Section 5(vi)
hereof); or
(ii) In the event of Employee's
death; or
(iii) By the Employer in the event
Employee is unable to perform Employee's
services hereunder for a continuous period of
six (6) months by reason of Employee's physical
or mental illness or incapacity, as determined
in good faith by the Employer; or
(iv) At the option of the Employee
following the occurrence of good reason, which, for
purposes of this Agreement, shall mean a reduction
by the Employer of the Employee's annual base salary
or bonus;
(v) By the Employee, without good reason
(as defined in Section 5(iv) hereof); or
(vi) At any time during the
Employment Period by the Employer, for cause,
which, for purposes of this Agreement, shall
mean any theft, conviction of a felony,
dishonesty, fraudulent misconduct, grossly
inadequate performance, willful malfeasance,
willful or intentional negligence or a grossly
negligent act, disclosure of trade secrets,
gross dereliction of duty, a material breach of
this Agreement by the Employee or other grave
misconduct on the part of Employee.
6. Confidentiality. Employee agrees not to
disclose in any manner information about the Employer
obtained by Employee while employed by the Employer,
other than information generally available to the public.
Employee agrees to return immediately to the Employer all
written material and other property containing such
information, as well as any other property belonging to
the Employer.
7. Noncompetition. Until the earlier of one
year following the expiration of the Term or on the first
anniversary of the termination of the Employee's active
employment hereunder, Employee agrees that the Employee
shall not, except as permitted by the Employer upon its
prior written consent, engage in, be employed by, or in
any way advise or act for, or have any financial interest
in any business which is a competitor of the Employer.
8. Severability. This Agreement is to be
governed by and construed according to the laws of the
State of Nebraska, without regard to such state's choice
of law rules. If any provision of this Agreement shall
be held invalid and unenforceable for any reason
whatsoever, such provision shall be deemed deleted and
the remainder of the Agreement shall remain in effect and
be valid and enforceable without such provision.
9. Amendments. This Agreement supersedes and
replaces any other Agreement between the parties relating
to employment, including the Change in Control Employment
Agreement, signed by CNW and the Employee and dated as of
December 20, 1994. Prior to the Merger Date, this
Agreement may be modified only by a writing signed by the
parties hereto. After the Merger Date, this Agreement
may be modified only by a writing signed by the Employee
and the Employer (or any successor thereto).
10. Continuing Liability. Unless this
Agreement or Employee's employment hereunder is
terminated in accordance with the express provisions
hereof, the parties shall have no right to terminate this
Agreement or the Employee's employment hereunder.
11. Waiver and Amendment of Three Agreements.
The Employee, if a party thereto, agrees to amend (i) the
Second Amended and Restated Stockholders Agreement, dated
as of March 30, 1992, as amended, (ii) an agreement,
dated as of June 21, 1993 among the parties to such
Stockholders Agreement, and (iii) the Registration Rights
Agreement, dated July 14, 1989, as amended (collectively,
the "Three Agreements"), to provide that they shall
terminate upon the "Effective Time" of the proposed
merger between UP Rail, Inc. and Chicago and North
Western Transportation Company (as "Effective Time" is
defined in the Agreement and Plan of Merger by and among
Union Pacific Corporation, UP Rail, Inc. and Chicago and
North Western Transportation Company dated as of March
16, 1995). Further, the Employee agrees to waive
(effective as of the Effective Time) any and all rights
under each of the Three Agreements to which the Employee
is a party.
12. The Employer's obligation to make the
payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected
by any circumstances, including, without limitation, set-
off, counterclaim, recoupment, defense or other claim,
right or action which the Employer may have against the
Employee or others. In no event shall the Employee be
obligated to seek other employment or take any other
action by way of mitigation of the amounts payable to the
employee under any of the provisions of the Agreement,
nor shall the amount of any payment hereunder be reduced
by any compensation earned by the Employee as a result of
employment by another employer.
IN WITNESS WHEREOF, both CNW and the Company
have caused this Agreement to be executed by one of their
duly authorized officers and Employee has executed this
Agreement as of the dates specified below.
EMPLOYEE:
Date: , 1995 __________________________
CHICAGO AND NORTH WESTERN
TRANSPORTATION COMPANY:
Date: , 1995 By:________________________
Title:_____________________
UNION PACIFIC RAILROAD COMPANY:
Date: , 1995 By:_________________________
Barbara Schaefer
Title: Vice President,
Human Resources
This agreement, release and waiver (the
"Agreement") is made as of the day of ,
1995, by and between CHICAGO AND NORTH WESTERN
TRANSPORTATION COMPANY, an Illinois corporation having
its principal place of business in the State of Illinois,
CHICAGO AND NORTH WESTERN RAILWAY COMPANY, a Delaware
corporation having its principal place of business in the
State of Illinois (collectively with their subsidiaries,
and affiliates, the "Company"), UNION PACIFIC RAILROAD
COMPANY, a Utah corporation having its principal place of
business in the State of Nebraska (collectively with its
subsidiaries and affiliates, "Union Pacific") and ,
a resident of (the "Executive").
The Executive and the Company entered into a
Change in Control Employment Agreement (the "Employment
Agreement") dated as of December 20, 1994.
The Executive's employment with the Company
shall terminate on the "Date of Termination", which shall
be (i) the later of April 24, 1995, or the day following
the last day of the revocation period described in
paragraph 11 or (ii) such earlier date as may be agreed
upon by the Company and the Executive; provided, however,
that the Date of Termination shall in no event occur
before the consummation of the "Offer" (as defined in the
Merger Agreement (described in paragraph 2 hereof).
The Company and the Executive desire to settle
all rights, duties and obligations between them,
including without limitation all such rights, duties and
obligations arising under the Employment Agreement or
otherwise out of the Executive's employment by the
Company.
In consideration of the representations,
covenants and mutual promises set forth in this
Agreement, it is hereby agreed as follows:
1. Benefits. Provided this Agreement has been executed
and the revocation period described in paragraph 11
hereof has passed, the Company shall pay, or cause
the Executive to be paid on the Date of Termination,
the following amounts which have been limited in
accordance with the provisions of paragraph 6(a) of
the Employment Agreement as determined by the
Company and agreed to by Executive (determined
without regard to the payment specified in paragraph
2 below):
(a) with respect to all earned but unpaid salary
and all accrued but unused 1995 vacation days
through the Date of Termination $ ;
(b) with respect to the Chicago and North Western
Transportation Company Bonus Plan (the "Bonus
Plan") for the period from January 1, 1995
through the Date of Termination, $ ;
(c) with respect to all compensation previously
deferred by or for the Executive together with
any accrued earnings thereon under the
Company's Excess Benefit Retirement Plan and
the Executive Retirement Plan, $ as
of December 31, 1994, not including additional
amounts to be paid based upon earnings and
contributions that may accrue subsequent
thereto;
(d) with respect to all other payments and benefits
described in the Employment Agreement, $ ;
provided, however, that, for three years
immediately following the Executive's
termination of employment, the Executive will
also be eligible to purchase from Union
Pacific, at Union Pacific's cost, medical
coverage comparable to that provided to active
employees of Union Pacific.
2. Separate Payment. In addition to the amounts
specified in paragraph 1, the Executive shall
receive a separate payment equal to the Extra
Payment as defined in Section 5.4(a) of the
Agreement and Plan of Merger by and among Union
Pacific Corporation, UP Rail, Inc. and Chicago and
North Western Transportation Company dated as of
March 16, 1995 ("Merger Agreement") in the amount of
$ .
3. Release by Executive. In consideration of the
foregoing, effective on the Date of Termination:
(i) Executive voluntarily, knowingly, and willingly
releases and hereby discharges the Company and its
respective officers, directors, partners,
shareholders, employees and agents, and each of
their predecessors, successors and assigns, from any
and all charges, complaints, claims, promises,
agreements, controversies, causes of action and
demands of any nature, known or unknown, associated
with Executive's employment with the Company
(including but not limited to claims under the
Employment Agreement) which Executive or Executive's
executors, administrators, successors or assigns
ever had, now have or hereafter can, shall or may
have by reason of any matter, cause or things
whatsoever arising to the time Executive signs this
Agreement, except (A) the Executive does not hereby
waive Executive's rights, if any, to indemnification
under Section 5.9 of the Merger Agreement (but does
waive any rights the Executive might otherwise
derive from Section 5.4 of the Merger Agreement),
(B) the Executive does not hereby waive or release
rights to any benefits vested an accrued prior to
the Date of Termination under any applicable plan of
the Company or its affiliates and the Executive is
not required to sign this Agreement in order to
receive such vested benefits, (C) the Executive does
not hereby waive or release rights to any rights to
benefits under any plans of the Company not
specifically addressed elsewhere herein under which
he would be entitled to benefits in the ordinary
course pursuant to the terms of such plans
(including but not limited to the right to continued
medical coverage under COBRA) and (D) the Executive
does not hereby waive or release any rights with
respect to the Executive's stock options set forth
under Section 2.3 of the Merger Agreement.
(ii) Executive hereby resigns all offices and
titles with the Company and its subsidiaries and
affiliates.
(iii) Executive also releases, without limitation,
any rights or claims arising prior to the time
Executive signs this Agreement relating in any way
to Executive's employment relationship with the
Company, or the termination thereof (including,
without limitation, any claim of wrongful discharge
or breach of express or implied employment
contract), and any rights or claims under any
statute, including the Federal Age Discrimination in
Employment Act, Title VII of the Civil Rights Act,
the Americans with Disabilities Act, Sections 503
and 504 of the Rehabilitation Act of 1973, the
Illinois Human Rights Act, the Municipal Code of
Chicago or any other Federal, state or local law.
(iv) Executive represents that Executive has not
filed any lawsuits or administrative complaints
asserting any claims that are released in this
paragraph 3. Executive further agrees that
Executive shall not be entitled to any recovery in
any proceeding against the Company or any of its
subsidiaries or successors asserting any claims that
are released in this paragraph 3 that are brought on
his behalf.
(v) The Executive understands and agrees that,
except as herein otherwise provided, the payments
enumerated in this Agreement are all that the
Executive will receive from the Company. The
Executive will receive no further wage, vacation,
severance or, except as herein otherwise provided,
other payments from the Company. The payments
enumerated in this Agreement include consideration
for the Executive signing this Agreement and
fulfilling the promises contained herein. The
parties agree that the payments enumerated in this
Agreement are in excess of any payments or benefits
to which the Executive may otherwise be entitled.
4. Stockholders Agreement. If a party thereto,
Executive agrees to amend (i) the Second Amended and
Restated Stockholders Agreement, dated as of March
30, 1992, as amended, (ii) an agreement, dated as of
June 21, 1993 among the parties to such Stockholders
Agreement, and (iii) the Registration Rights
Agreement, dated July 14, 1989, as amended
(collectively, the "Three Agreements") to provide
that they shall terminate upon the "Effective Time"
of the proposed merger between the UP Rail, Inc. and
Chicago and North Western Transportation Company (as
"Effective Time" is defined in the Merger
Agreement). Further the Executive agrees to waive
and release (effective as of the Effective Time) any
and all rights under each of the Three Agreements to
which the Executive is a party.
5. Cooperation. Executive agrees that, upon the
request of the Company, Executive will cooperate in
good faith in any litigation to which the Company is
a party and as to which the Executive has relevant
information or materials.
6. Full Statement. The Company's obligation to make
the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall
not be affected by any circumstances, including,
without limitation, set-off, counterclaim,
recoupment, defense or other claim, right or action
which the Company may have against the Executive or
others. In no event shall the Executive be
obligated to seek other employment or take any other
action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this
Agreement, nor shall the amount of any payment
hereunder be reduced by any compensation earned by
the Executive as a result of employment by another
employer.
7. Confidentiality. Executive agrees not to disclose
in any manner information about the Company or Union
Pacific obtained by Executive while employed by the
Company, other than information generally available
to the public. Executive agrees to return
immediately to the Company all written material and
other property containing such information, as well
as any other property belonging to the Company.
8. Tax Withholding. The Company's obligation to pay
amounts hereunder are subject to its withholding
obligations under applicable federal, state and
local tax laws. The Executive is responsible for
any tax liability associated with payments provided
under this Agreement which under applicable law he
is obligated to pay.
9. Consideration Period. The Executive confirms that
the Executive has been given twenty-one (21) days to
review and consider this Agreement before signing
it. The Executive understands that Executive may
use as much or as little of this period as Executive
wishes prior to signing.
10. Consultation with Attorney. The Executive is
advised, at his or her own expense, to consult with
an attorney before signing this Agreement.
11. Revocation Rights. The Executive may revoke this
Agreement within seven (7) business days of the date
of the Employee's signature. Revocation can be made
by delivering a written notice of revocation to
Robert Schmiege at the Company. For this revocation
to be effective, written notice must be received no
later than close of business on the seventh (7th)
business day after the Executive signs this
Agreement. If Executive revokes this Agreement, it
shall not be effective or enforceable and Executive
will not receive any payments or benefits described
in paragraph 2. If the Executive does not revoke
this Agreement, then, upon expiration of the
revocation period provided in this paragraph 11,
this Agreement shall immediately become irrevocable
as to, and binding upon, the Executive.
12. Binding Agreement. Unless revoked by the Executive
during the revocation period described in paragraph
11 hereon, this Agreement shall be binding on and
inure to the benefit of the Company, its successors
and assigns.
13. Miscellaneous.
(i) if all or any part of this Agreement is declared
by any court or governmental authority to be
unlawful or invalid, such unlawfulness or invalidity
shall not serve to invalidate any portion of this
Agreement not declared to be unlawful or invalid.
Any paragraph or a part of a paragraph so declared
to be unlawful or invalid shall, if possible, be
construed in a manner which will give effect to the
terms of such paragraph or part of a paragraph to
the fullest extent possible while remaining lawful
and valid.
(ii) This Agreement shall not be altered, amended,
or modified except by written instrument executed by
the Company and the Executive. A waiver of any
term, covenant, agreement or condition contained in
this Agreement shall not be deemed a waiver of any
other term, covenant, agreement or condition and any
waiver of any default in any such term, covenant,
agreement or condition shall not be deemed a waiver
of any later default thereof or of any other term,
covenant, agreement or condition.
(iii) This Agreement may be executed in several
counterparts, each of which shall be deemed to be an
original, but all of which together will constitute
one and the same instrument.
(iv) This Agreement forms the entire agreement
between the parties hereto with respect to any
severance payment and with respect to the subject
matter contained in the Agreement. This Agreement
shall supersede all prior agreements, promises, and
representations regarding severance or other
payments contingent upon termination of employment,
whether in writing or otherwise.
(v) The captions of this Agreement are not part of
the provisions hereof and shall not have any force
or effect.
(vi) The provisions of this Agreement shall be
interpreted and construed in accordance with the
laws of the State of Illinois without regard to its
choice of law principles.
IN WITNESS WHEREOF, the parties have executed
this Agreement as of the dates specified below.
Date: , 1995
Executive
CHICAGO AND NORTH WESTERN
TRANSPORTATION COMPANY
Date: , 1995 By:
Its:
CHICAGO AND NORTH WESTERN
RAILWAY COMPANY
Date: , 1995 By:
Its:
UNION PACIFIC
RAILROAD COMPANY
Date: , 1995 By:
Its:
EXPEDITED CONSIDERATION REQUESTED UP/CNW-134
BEFORE THE
INTERSTATE COMMERCE COMMISSION
Finance Docket No. 32133
UNION PACIFIC CORPORATION,
UNION PACIFIC RAILROAD COMPANY AND
MISSOURI PACIFIC RAILROAD COMPANY -- CONTROL --
CHICAGO AND NORTH WESTERN TRANSPORTATION COMPANY
AND CHICAGO AND NORTH WESTERN RAILWAY COMPANY
APPLICANTS' PETITION FOR DETERMINATION THAT
SECURITIES TERMS ARE JUST AND REASONABLE
The primary Applicants, Union Pacific
Corporation ("UPC"), Union Pacific Railroad Company
("UPRR"), Missouri Pacific Railroad Company ("MPRR"),(1)
Chicago and North Western Transportation Company ("CNWT")
and Chicago and North Western Railway Company ("CNW"),
hereby submit this petition for a determination that the
terms of the proposed merger of UP Rail, Inc. ("UP
Rail"), an indirect wholly-owned subsidiary of UPC, into
CNWT are just and reasonable.
This petition is supported by the verified
statement of J. Tomilson Hill of The Blackstone Group,
L.P., attached as Exhibit A hereto, and by the Offer to
Purchase dated March 23, 1995, which is attached as
Exhibit B hereto.
BACKGROUND
The Commission authorized common control of UP
and CNW in Decision No. 25 in this proceeding, served
March 7, 1995. That decision is scheduled to become
effective on April 6, 1995. No party sought a stay of
1 UPRR and MPRR are referred to collectively as "UP."
UPC and its subsidiaries generally are referred to
as "Union Pacific."
the decision within the ten-day period provided for in 49
C.F.R. SECTION 1115.3(f).
On March 7, 1995, following the issuance of
Decision No. 25, Union Pacific announced that it had
decided to explore a variety of options for the further
coordination of UP and CNW, including a possible
acquisition.
Subsequently, there were discussions between
the companies concerning a possible acquisition, which
proved fruitful, and on March 10, 1995, Union Pacific and
CNWT announced that they had reached agreement in
principle on an acquisition by Union Pacific of all CNWT
stock at a price of $35 per share. A copy of an SEC
Schedule 13D embodying this announcement was filed in
this Docket on the same day.
UPC, UP Rail, and CNWT entered into an
Agreement and Plan of Merger dated as of March 16, 1995
("the Merger Agreement"). The Merger Agreement was filed
in this Docket on March 17, 1995. A text of the Merger
Agreement is Annex I to Exhibit B hereto.
The Merger Agreement provides that UP Rail will
make a tender offer for 100% of the common stock of CNWT
at a price of $35 per share ("the Tender Offer").
Consummation of the Tender Offer is subject to various
conditions, including (a) that the shares tendered,
together with the CNWT stock already owned by UP Rail and
UPC, constitute a majority of the CNWT stock, and (b)
that Decision No. 25 has become final and effective.
Following consummation of the Tender Offer, UP Rail is to
be merged into CNWT, in a transaction ("the Merger") in
which all remaining (i.e., non-tendering) shareholders of
CNWT will receive $35 per share in cash -- the same price
paid to tendering shareholders in the Tender Offer.
The Tender Offer was commenced on March 23,
1995, and is scheduled to expire on April 19, 1995. A
copy of the Offer to Purchase (Exhibit B hereto) was
previously filed in this Docket on March 24, 1995.
On March 10 and 13, 1995, several purported
class action lawsuits were filed on behalf of CNWT
shareholders against CNWT, CNWT's directors, UPC and
certain other parties in the Delaware Court of Chancery.
An amended complaint was filed on March 28. The amended
complaint contends, among other things, that the purchase
price for CNWT's stock was inadequate, that CNWT's
directors breached their fiduciary duties in entering
into the Merger Agreement, and that the Tender Offer
materials fail to disclose certain alleged facts which
plaintiffs contend are material. Applicants believe that
these suits are entirely without merit, and intend to
seek their dismissal on the ground that they infringe
upon the Commission's exclusive jurisdiction over
railroad control transactions.
THIS PETITION
By this petition, the primary Applicants are
requesting that the Commission determine that the $35-
per-share price to be paid to CNWT shareholders in the
Merger is just and reasonable. Because effectuation of
the Merger is an important step in fully realizing the
substantial competitive and efficiency benefits of the
integration of the UP and CNW railroads, Applicants are
requesting that the Commission give this petition
expedited consideration under the modified procedure (49
C.F.R. pt. 1112). A suggested procedural schedule is set
forth at pages 14-16 below.
The Commission's authority -- and indeed
obligation -- to determine whether the securities terms
of a railroad control transaction are just and reasonable
is well-established. The U.S. Supreme Court held in
Schwabacher v. United States, 334 U.S. 182, 197-99
(1948), that the Commission must decide the fairness of
the securities terms of a control transaction that falls
within its jurisdiction.(2) Any other remedies to which
securityholders might otherwise have been entitled, such
as state-law appraisal rights, are pre-empted pursuant to
49 U.S.C. SECTION 11341(a). Id. at 201; Norfolk & Western Ry.
v. ATDA, 499 U.S. 117, 130-31 (1991).(3)
The Schwabacher Court noted that the
Commission's focus, in determining whether the securities
terms of a control transaction are just and reasonable,
is "to see that minority interests are protected." 334
U.S. at 201. The Commission has often made this same
2 See also, e.g., Finance Docket No. 31035, Merger --
Baltimore & Ohio R.R. & Chesapeake & Ohio Ry.,
("B&O/C&O"), Decision served Mar. 2, 1988, p. 3
("where the Commission exercises its jurisdiction to
approve and authorize a railroad merger, pursuant to
sections 11343-11348, it has an obligation to pass
upon all aspects of the transaction relating to
capital liabilities"). Since the enactment of the
Staggers Act, this requirement has applied only to
transactions that, as here, involve two or more
Class I carriers. See Norfolk & Western Ry. --
Purchase -- Illinois Terminal R.R., 363 I.C.C. 882,
890-92 (1981).
3 See also, e.g., Bruno v. Western Pacific R.R., 498
A.2d 171 (Del. Ch. 1985), aff'd mem., 508 A.2d 72
(Del. 1986), cert. denied, 482 U.S. 927 (1987);
Altman v. Central of Georgia Ry., 488 F.2d 1302
(D.C. Cir. 1973); Suffin v. Pennsylvania R.R., 276
F. Supp. 549 (D. Del. 1967), aff'd, 396 F.2d 75 (3d
Cir. 1968), cert. denied, 393 U.S. 1062 (1969);
Manufacturers Life Insurance Co. v. Missouri Pacific
R.R., Civ. No. 91-126-SLR, 1992 U.S. Dist. LEXIS
19612 (D. Del. Dec. 10, 1992).
point. See, e.g., Union Pacific Corp., Pacific Rail
System, Inc., & Union Pacific R.R. -- Control -- Missouri
Pacific Corp. & Missouri Pacific R.R. ("UP/MP/WP"), 366
I.C.C. 462, 635 (1982), aff'd in relevant part sub nom.
Southern Pacific Transportation Co. v. ICC, 736 F.2d 708,
725-27 (D.C Cir. 1984), cert. denied, 469 U.S. 1208
(1985) ("In appraising any transaction affecting the
rights of stockholders, it is incumbent upon us to see
that the interests of the minority stockholders are
protected and that the overall proposal is just and
reasonable to those stockholders . . . ."); Union Pacific
Corp., Union Pacific R.R. & Missouri Pacific R.R. --
Control -- Missouri-Kansas-Texas R.R. ("UP/MKT"), 4
I.C.C.2d 409, 515-16 (1988), petition for review
dismissed sub nom. RLEA v. ICC, 883 F.2d 1079 (D.C. Cir.
1989); Missouri Pacific R.R. -- Merger -- Missouri
Pacific R.R. ("MP Merger"), 360 I.C.C. 6, 16 (1978).
It has also repeatedly been emphasized that
Schwabacher stands for the proposition that the mere fact
that minority shareholders "hold out," and do not follow
the majority in tendering or exchanging their shares,
does not entitle them to any premium. E.g., MP Merger,
360 I.C.C. at 30; Fried v. United States, 212 F. Supp.
886, 890 (S.D.N.Y. 1962) (three-judge court), aff'g Erie
R.R. Merger, Delaware, Lackawanna & Western R.R. ("Erie
Lackawanna"), 312 I.C.C. 185 (1960), Stott v. United
States, 166 F. Supp. 851, 859 (S.D.N.Y. 1958) (three-
judge court), aff'g Louisville & Nashville R.R. Merger
("L&N"), 295 I.C.C. 457 (1957).
Generally, the Commission has addressed the
issue of whether the securities terms of a merger or
other control transaction are just and reasonable at the
same time as it has determined whether the transaction
itself is in the public interest. E.g., UP/MP/WP;
UP/MKT; MP Merger. Here, the control issue was presented
and decided before it was known whether there would be
any further acquisition of CNWT securities by Union
Pacific, or what the terms of such a securities
acquisition would be. But this sequence of events does
not diminish the Commission's authority to make a just
and reasonable determination at this time through a
supplemental decision in this proceeding.(4) Indeed,
exactly such a procedure was contemplated in the original
control application. See UP/CNW-6, Jan. 29, 1993, p. 14,
noted in Decision No. 5, served Feb. 26, 1993, p. 4, 58
Fed. Reg. 11626, 11627 (1993).
Applicants are requesting a just and reasonable
determination by the Commission, rather than attempting
to carry out the Merger through an exemption. Applicants
are clearly entitled to obtain a just and reasonable
determination on the merits.(5) The Commission has
4 Cf., e.g., Suffin, supra, 276 F. Supp. at 553
(Commission had exclusive authority to determine
whether the terms of an exchange of securities
undertaken to satisfy a condition to an ICC-approved
merger were just and reasonable).
5 It is clear that Applicants are entitled to continue
to proceed under the regulatory provisions of the
Act, rather than by way of an exemption. See
Decision No. 25, p. 63 (rejecting SP's argument that
Applicants in the UP/CNW control case should have
been granted an exemption for coordinations that
would give UP control over CNW; "Applicants are
entitled to have our decision made in the formal
application context"); cf. Ex Parte No. 282 (Sub-No.
18), Railroad Consolidation Procedures: Class
Exemption for Transactions Within a Corporate Family
("Rulemaking"), Decision served Aug. 6, 1992, p. 5
("The partial revocation remedy, enabling a bypass
of the class exemption procedure in favor of the
SECTIONSECTION 11344-11345 application process, would remain
available."); Finance Docket No. 31387, Canadian
National Ry. -- Partial Revocation of Class
(continued...)
extensive experience in determining whether the
securities terms of Class I railroad control transactions
are just and reasonable, and is the appropriate forum for
resolving such issues. Moreover, for the Commission to
determine the matter will have the benefit of providing
certainty as to the pre-emption of state-law remedies.(6)
5(...continued)
Exemption -- Lease From Grand Trunk Western R.R.,
Decision served Jan. 27, 1989, pp. 1-2 (partially
revoking corporate family class exemption to
guarantee applicability of Section 11341(a) pre-
emption); Union Pacific R.R. & Missouri Pacific R.R.
-- Trackage Rights Over Lines of Chicago & North
Western Transportation Co. Between Fremont,
NE/Council Bluffs, IA, & Chicago, IL, 7 I.C.C.2d
177, 180-81 (1990). These more recent decisions can
only be understood, in Applicants' view, to
supersede the 1981 decision in Finance Docket No.
29757, Colorado & Southern Ry. -- Merger Into
Burlington Northern R.R. -- Exemption & Request for
Determination of Fairness ("Colorado & Southern"),
Decision served Dec. 31, 1981, in which the
Commission declined a request that it partially
revoke the corporate family class exemption to the
extent necessary to make a just and reasonable
determination. Colorado & Southern is in any event
fundamentally different from this case, since there
the applicants wished to carry out the transaction
on an exempt basis, whereas here there has already
been a full-scale control proceeding on the merits.
See id., p. 5 (finding it inappropriate that the
Commission should "determine a substantive issue in
a proceeding and at the same time exempt it from
review"); see also B&O/C&O, supra, p. 4 (stressing
that in Colorado & Southern, the Commission had
"found it unnecessary to review and approve a
railroad merger").
6 As already noted (p. 5 & n.3 supra), all state-law
and other remedies are pre-empted when the
Commission exercises its control authority under 49
U.S.C. SECTIONSECTION 11343, et seq. On the other hand, it is
less clear whether there is a pre-emption when a
control transaction takes place pursuant to a
Section 10505 exemption. In two decisions, the
Commission has held that when a merger is carried
out pursuant to the corporate-family class
exemption, there is no Section 11341(a) pre-emption,
and minority shareholders can therefore invoke
state-law appraisal remedies. Colorado & Southern,
supra; B&O/C&O, supra. See also, e.g., Railroad
Consolidation Procedures -- Trackage Rights
Exemption, 1 I.C.C.2d 270, 279 (1985) (no Section
11341(a) pre-emption for consolidation transactions
exempted under Section 10505). But more recent
(continued...)
In addition, Applicants believe it is clear that the
Merger does not qualify for an exemption.(7)
THE BASIS FOR A JUST AND REASONABLE DETERMINATION
6(...continued)
Commission authority rejects the rationale of these
decisions, and holds that control transactions
exempted under Section 10505 do give rise to Section
11341(a) pre-emption. The latest such holding is in
Decision No. 25 in this proceeding, at pp. 63-64,
where the Commission stated that it disagreed
"with SP's argument that the section 11341(a)
immunity provision would not apply in the
section 10505 exemption context. The literal
terms of the section 11341(a) immunity
provision indicate that it is applicable to any
transaction 'approved or exempted by the
Commission under this subchapter' (i.e., under
subchapter III of Chapter 113 of Subtitle IV of
Title 49, United States Code). The Commission,
however, 'has consistently taken the position
that [the section 11341(a) immunity provision]
applies to authorizations by exemption [under
section 10505] as well as to approvals.'
Delaware and Hudson Railway Co. -- Lease and
Trackage Rights -- Springfield Terminal Ry.
Company, Finance Docket No. 30965 (Sub-Nos. 1
and 2) (ICC served Apr. 21, 1993) (at 2 n.4)."
(Bracketed material in original.) See also, e.g.,
Finance Docket No. 30965 (Sub-Nos. 1 & 2), Delaware
& Hudson Ry. -- Lease & Trackage Rights Exemption --
Springfield Terminal Ry., Decision served Mar. 16,
1992, p. 6.
7 The Merger does not fall within the class exemption
for control transactions within a corporate family
(49 C.F.R. SECTION 1180.2(d)(3)) because it is not
distinct from the acquisition of CNWT through the
Tender Offer. See Finance Docket No. 30765,
Missouri Pacific R.R. -- Control & Consolidation
Exemption -- Jefferson Southwestern R.R., Decision
served Mar. 19, 1986, p. 1 (consolidation must be
"distinct from the acquisition of exclusive control"
in order to be "considered a transaction within a
corporate family"); Rulemaking, p. 5 & n.14 (same).
Nor does the Merger qualify for a transaction-
specific exemption under Section 10505; a just and
reasonable determination has always been a normal --
and required -- component of every control
transaction involving Class I railroads, and the
exercise of the Commission's regulatory authority
cannot have been rendered unnecessary simply because
the sequence of events has been different here.
The facts overwhelmingly support a
determination that the $35-per-share purchase price for
CNWT stock is just and reasonable. Those facts are set
forth at length in the Offer to Purchase and the verified
statement of Mr. Hill. Briefly, the following are among
the key considerations:
* CNWT shareholders will receive a large
premium over the market price of their stock prior to the
announcement of the purchase terms. The price of $35 per
share represents a 34% premium over the market price of
$26.125 on March 9, 1995, the last full day of trading
before the $35-per-share price was announced; a 41%
premium over the market price of $24.875 on March 6,
1995, the last full day of trading before Decision No. 25
was issued and Union Pacific announced that it was
considering various possible steps including an
acquisition of CNWT; and a 49% premium over the average
CNWT share price during the thirty days ending on March
9, 1995. Offer to Purchase, p. 43; Hill V.S., p. 8.
Payment of a premium price has been found to be
compelling evidence that securities terms are just and
reasonable. See, e.g., UP/MP/WP, 365 IC.C. at 637;
UP/MKT, 4 I.C.C.2d at 516.
* The acquisition price and the various
other terms of the Merger Agreement were negotiated at
arm's-length between independent parties. The members of
CNWT's board of directors unanimously approved the
acquisition terms (with Richard K. Davidson, President of
UPC, not participating). The CNWT board members (Mr.
Davidson excepted) have no affiliation with Union
Pacific. The arm's-length negotiations between CNWT and
Union Pacific led Union Pacific to increase its proposed
purchase price twice. See Offer to Purchase, pp. 5-6.
Such arm's-length negotiations have many times been held
to be crucial evidence that securities terms are just and
reasonable. See, e.g., UP/MP/WP, 366 I.C.C. at 638;
Norfolk Southern Corp. -- Control -- Norfolk & Western
Ry. & Southern Ry. ("NS"), 366 I.C.C. 171, 232 (1982);
CSX Corp. -- Control -- Chessie System, Inc. & Seaboard
Coast Line Industries, Inc. ("CSX"), 363 I.C.C. 518, 594
(1980), aff'd sub nom. Brotherhood of Maintenance of Way
Employees v. ICC, 698 F.2d 315 (7th Cir. 1983); Newrail
Co. -- Purchase -- Western Pacific R.R. ("Newrail"), 354
I.C.C. 885, 899-901 (1979); Great Northern Pacific &
Burlington Lines, Inc. -- Merger -- Great Northern Ry.,
331 I.C.C. 228, 260 (1967), aff'd sub nom. United States
v. United States, 296 F. Supp. 853, 872 (D.D.C. 1968)
(three-judge court), aff'd sub nom. United States v. ICC,
396 U.S. 491, 516-22 (1970); Seaboard Air Line R.R. --
Merger -- Atlantic Coast Line R.R. ("Seaboard Coast
Line"), 320 I.C.C. 122, 192 (1963), aff'd sub nom.
Florida East Coast Ry. v. United States, 259 F. Supp. 993
(M.D. Fla. 1966) (three-judge court), aff'd mem., 386
U.S. 544 (1967); Erie Lackawanna, 312 I.C.C. at 188.
* The CNWT board received the advice of, and
a written fairness opinion from, The Blackstone Group
("Blackstone"). See Offer to Purchase, pp. 5-14.
Blackstone is an investment banking firm with extensive
expertise in the area of railroad securities and an in-
depth knowledge of CNWT's operations based on, among
other things, the participation of Blackstone's
affiliate, Blackstone Capital Partners L.P., in the
leveraged buyout of CNWT in 1989. See Hill V.S., pp. 1-
2. Blackstone's formal written opinion as to the
fairness of the acquisition terms to CNWT shareholders is
attached to Mr. Hill's verified statement.(8) The
analyses and fairness opinions of financial experts of
this kind have repeatedly been cited by the Commission as
an important factor in concluding that the securities
terms of a transaction are just and reasonable. See,
e.g., UP/MKT, 4 I.C.C.2d at 515-16; UP/MP/WP, 366 I.C.C.
at 633-34; NS, 366 I.C.C. at 232; CSX, 363 I.C.C. at 595;
Newrail, 354 I.C.C. at 901; Illinois Central Gulf R.R. --
Acquisition -- Gulf, Mobile & Ohio R.R., Illinois Central
R.R. ("ICG"), 338 I.C.C. 805, 816 (1971), aff'd sub nom.
Missouri Pacific R.R. v. United States, 346 F. Supp. 1193
(E.D. Mo. 1972) (three-judge court), & sub nom. Kansas
City Southern Ry. v. United States, 346 F. Supp. 1211
(W.D. Mo. 1972) (three-judge court), aff'd mem., 409 U.S.
1094 (1973); Seaboard Coast Line 320 I.C.C. at 192;
Norfolk & Western Ry. Merger, Virginian Ry., 307 I.C.C.
401, 429 (1959).
* As Mr. Hill explains in his verified
statement, Blackstone considered, in arriving at the
conclusion that the purchase price for the CNWT stock was
fair to CNWT shareholders, a range of pertinent
factors,(9) including: CNWT's likely earnings power, as
reflected in historical earnings and projected future
earnings; recent market prices and price/earnings ratios
for CNWT stock, and for the stock of comparable
8 Union Pacific, for its part, was advised by CS First
Boston, an investment banking firm with similar
expertise, which provided an opinion that the terms
of the acquisition are fair to UPC shareholders.
See Offer to Purchase, pp. 7, 14-16.
9 CS First Boston considered similar factors in
advising Union Pacific that the acquisition terms
were fair to UPC shareholders. See Offer to
Purchaser, pp. 14-16.
companies; the potential synergies of a UP/CNW
combination; the terms of comparable transactions; and
the risks and uncertainties associated with alternative
possible transactions.(10) The Commission has found in
many past cases that it is proper to analyze just such
factors in order to arrive at a conclusion that the
securities terms of a transaction are just and
reasonable. See, e.g., UP/MKT, 4 I.C.C.2d at 515-16;
Chicago, Milwaukee, St. Paul & Pacific R.R. --
Reorganization -- Acquisition By Grand Trunk Corp., 2
I.C.C.2d 161, 218 (1984); UP/MP/WP, 366 I.C.C. at 633-38;
MP Merger, 360 I.C.C. at 16-18; Newrail, 354 I.C.C. at
901; ICG, 338 I.C.C. at 816-17; Erie Lackawanna, 312
I.C.C. at 188, 236; L&N, 295 I.C.C. at 493-500.
In sum, Applicants submit that the detailed
discussion of fairness issues in the Offer to Purchase
(pp. 5-14), together with the verified statement of
Blackstone's Mr. Hill, amply support a finding that the
$35 per share purchase price for CNWT is just and
reasonable.
SUGGESTED PROCEDURAL SCHEDULE
Applicants would suggest that the Commission
employ the modified procedure (49 C.F.R. pt. 1112) for
this follow-on proceeding. The modified procedure has
10 Specifically, Blackstone concluded that, given Union
Pacific's already-existing ownership interest in
CNWT, the close traffic and financial relationships
between the companies, the Commission's March 7,
1995 issuance of Decision No. 25, and the need for
other rail acquirers to obtain control authority
from the Commission, "viable competition to acquire
[CNWT] was unlikely to emerge." Offer to Purchase,
p. 12. In fact, no other bidders have emerged since
the proposed acquisition was announced on March 10,
1995. See id., p. 8.
been used in similar proceedings, and its use has been
upheld by the courts. See, e.g., Finance Docket No.
29594, Kansas City Southern Ry. -- Stock, Decision served
Feb. 8, 1982, p. 1, aff'd sub nom. Laird v. ICC, 691 F.2d
147, 154-55 (3d Cir. 1982), cert. denied, 461 U.S. 927
(1983).
Applicants would suggest that a notice of this
proceeding be published in the Federal Register. Federal
Register publication is the standard means by which
public notice is normally given of all aspects of
proposed Class I railroad control transactions, and it is
clear that such publication provides notice to all
interested persons as a matter of law. See, e.g.,
Friends of Sierra R.R. v. ICC, 881 F.2d 663, 667-68 (9th
Cir. 1989), cert. denied, 493 U.S. 1093 (1990); Finance
Docket No. 31058, Mendocino Coast Ry. -- Acquisition
Exemption -- Assets of California Western R.R., Decision
served Dec. 28, 1987, p. 5. Applicants are also serving
a copy of this petition on all active parties in this
proceeding and on counsel for the plaintiffs in the
Delaware shareholder suits, and will serve a copy on any
known CNWT shareholders who do not tender their shares in
the Tender Offer.
The Federal Register notice would provide a
summary of this petition, advise interested persons that
they could obtain a copy of the full petition from
Applicants' attorneys, and set forth a schedule for
written submissions. The following schedule appears
appropriate:
30 days from Federal Submission of
Register publication written comments
by any interested
person
45 days from Federal Submission of
Register publication reply by Appli-
(or such earlier date cants
as they may submit
them)
The matter could then be decided promptly thereafter.
Applicants doubt that there will be any need or
justification for appreciable discovery. If interested
parties do appear and seek discovery, Applicants will
respond expeditiously, attempt to resolve any disputes
informally, and present to the Commission for prompt
decision any disputes that cannot be resolved informally.
Expedited handling of this matter is in keeping
with the Commission's new six-month procedural schedule
for resolving all issues (including, among many others,
securities fairness) in the BN/Santa Fe proceeding.
Moreover, the need for expedition in this matter is
apparent. The Merger is an important step in achieving
the complete integration of the UP and CNW railroads, and
the attendant enhancement of competition and reduction in
costs and overheads. Based on a very full record built
over a two-year period, which included extensive evidence
concerning the benefits of a full integration of the
railroads,(11) the Commission has found that the common
control of these railroads is clearly in the public
interest. The present matter should be brought to a
conclusion expeditiously so that there will be no
unnecessary delay in achieving the major public benefits
of a UP/CNW combination.
Respectfully submitted,
RONALD J. CUCHNA CARL W. VON BERNUTH
STUART F. GASSNER RICHARD J. RESSLER
Chicago and North Western Union Pacific Corporation
11 See UP/CNW-127, pp. 62-66 (collecting record
citations).
Transportation Company Martin Tower
One North Western Center Eighth and Eaton Avenues
Chicago, Illinois 60606 Bethlehem, Pennsylvania 18018
(312) 559-7000 (610) 861-3290
/s/ L. John Osborn AR JAMES V. DOLAN
L. JOHN OSBORN PAUL A. CONLEY, JR.
Suite 600, East Tower LOUISE A. RINN
1301 K Street, N.W. Law Department
Washington, D.C. 20005 Union Pacific Railroad Company
(202) 408-6351 Missouri Pacific Railroad
Company
Attorneys for Chicago and 1416 Dodge Street
North Western Transpor- Omaha, Nebraska 68179
tation Company and (402) 271-5000
Chicago and North Western
Railway Company
/s/ Arvid E. Roach
ARVID E. ROACH II
Covington & Burling
1201 Pennsylvania Avenue, N.W.
P.O. Box 7566
Washington, D.C. 20044-7566
(202) 662-5388
Attorneys for Union Pacific
Corporation, Union Pacific
Railroad Company and
Missouri Pacific Railroad
Company
April 4, 1995
CERTIFICATE OF SERVICE
I, Michael L. Rosenthal, certify that on this 4th
day of April, 1995, I caused a copy of the foregoing
document to be served by first-class mail on all parties of
record or their counsel, and on counsel for the plaintiffs
in the shareholder suits filed in the Court of Chancery of
the State of Delaware, as follows:
Joseph A. Rosenthal, Esq.
Rosenthal, Monhait, Gross & Goddess
P.O. Box 1070
Wilmington, Delaware 19899
(Counsel for Plaintiffs in Feiwel v. Martin,
Civil Action No. 14109; Steiner v. Davidson,
Civil Action No. 14111; Katz v. Martin, Civil
Action No. 14112; Gerber v. Martin, Civil
Action No. 14117)
Karen Morris, Esq.
Morris & Morris
Suite 1600
1105 North Market Street
Wilmington, Delaware 19801
(Counsel for Plaintiff in Kowal v. Chicago &
Northwestern Transportation Company, Civil
Action No. 14115)
/s/ Michael L. Rosenthal
Michael L. Rosenthal
VERIFIED STATEMENT OF J. TOMILSON HILL
My name is J. Tomilson Hill. I am a General
Partner of Blackstone Group Holdings, L.P. ("BGH"), an
affiliate of The Blackstone Group L.P. ("Blackstone"). I
joined Blackstone in 1994. I have more than 20 years of
experience in investment banking, starting my career at The
First Boston Corporation in 1973. I was co-founder of the
Mergers and Acquisitions Department of First Boston and was
later head of the mergers Department at Smith Barney. I
joined Lehman Brothers as a partner in 1982, serving as co-
head and later head of Mergers and Acquisitions, and then as
co-head and head of Investment Banking. I became Co-Chief
Executive Officer of Lehman Brothers in 1990 and in early
1993 became Co-President and Co-COO of Shearson Lehman
Brothers Holdings Inc. I am a graduate of Harvard College
(1970) and the Harvard Business School (1973). I was the
lead Blackstone person advising Chicago and North Western
Transportation Company ("CNW") in the matter discussed
below.
Blackstone is a private investment banking firm
that was founded in 1985 by Mr. Peter G. Peterson, Chairman,
and Mr. Stephen A. Schwarzman, President and Chief Executive
Officer. Blackstone is engaged in providing an array of
financial advisory services to major corporate clients with
respect to mergers and acquisitions, financing transactions
and strategic matters. Since its founding, Blackstone has
advised on transactions with a value of in excess of $100
billion.
Blackstone Capital Partners L.P., an affiliate of
Blackstone, led a leveraged, going-private transaction of
CNW Corporation, a predecessor of CNW, in 1989, and
Blackstone has since that time performed various financial
advisory services for CNW.
Pursuant to a letter agreement dated December 14,
1994, CNW and Blackstone confirmed that Blackstone had been
retained, effective November 29, 1994, to act as CNW's
exclusive financial advisor with respect to various matters,
including certain matters affecting CNW arising out of Union
Pacific Corporation's ("Union Pacific") then proposed
acquisition of Santa Fe Pacific Corporation and an
evaluation of strategic alternatives to maximize the long-
term shareholder value for CNW.
Pursuant to a letter agreement dated March 3,
1995, which was entered into in addition to the December 14,
1994 letter agreement, CNW and Blackstone confirmed that
Blackstone had been retained to act as CNW's exclusive
financial advisor with respect to a potential sale of,
investment in, recapitalization by, strategic alliance with
or joint venture involving CNW.
On March 7, 1995, after the Interstate Commerce
Commission (the "ICC") issued a written opinion approving
Union Pacific's control of CNW, Union Pacific initiated
discussions with CNW concerning, among other things, the
possibility of exploring the acquisition by Union Pacific of
CNW. Union Pacific indicated that it would be prepared to
explore an acquisition of CNW at a price in the lower $30
per Share range.
On March 9, 1995, a special meeting of the CNW
Board of Directors (with Mr. Davidson absent due to his
status as President of Union Pacific) was held to consider
the possibility of a transaction whereby CNW would be
acquired by Union Pacific. I was present at that meeting,
and on behalf of Blackstone, presented certain materials to
the Board presenting a range of values for CNW Shares of
Common Stock, par value $0.01 (the "Shares"), using several
different analyses and methodologies. After considering
various factors, including the advice of Blackstone, it was
the consensus of the CNW Board of Directors that management
of CNW enter into negotiations with Union Pacific only if
Union Pacific were to make an offer which exceeded the lower
$30 per Share range.
During a recess in the meeting, Drew Lewis,
Chairman and Chief Executive Officer of Union Pacific,
contacted Robert Schmiege, Chairman, President and Chief
Executive Officer of CNW, and indicated that Union Pacific
was prepared to pursue discussions with CNW concerning a
possible transaction at a price of $34 per Share.
The CNW Board reconvened to consider the interest
expressed by Union Pacific, and the Board, again with the
advice of Blackstone and others, determined that although
the Board might be willing to pursue a transaction at $34
per Share, Mr. Schmiege should attempt to increase the per
Share consideration. During another recess in the meeting,
Mr. Schmiege advised Mr. Lewis that the CNW Board was
prepared to negotiate a transaction for the sale of CNW, and
after further discussion, the two men reached an
understanding for a transaction in which Union Pacific would
acquire 100% of CNW Shares at a price of $35 per Share,
subject to certain conditions, such as the approval of CNW's
Board of Directors.
The CNW Board reconvened, and Blackstone rendered
an oral opinion that the cash consideration of $35 per Share
of CNW stock was fair to the holders of CNW Shares from a
financial point of view. The Board, after considering
various factors, including the fairness opinion of
Blackstone, approved a transaction in which Union Pacific
would acquire 100% of the CNW Shares for $35 per Share in
cash, subject to the negotiation and execution of a
definitive merger agreement. On March 10, Union Pacific and
CNW issued a joint press release regarding their
discussions.
The CNW Board of Directors requested Blackstone's
written opinion with respect to the fairness from a
financial point of view to the holders of Shares of CNW of
the cash consideration to be received by such holders
pursuant to the Agreement and Plan of Merger dated as of
March 16, 1995 (the "Merger Agreement"), among CNW, Union
Pacific, and UP Rail, Inc. ("UP Rail"), an indirect wholly
owned subsidiary of Union Pacific.
The Merger Agreement provides, among other things,
that UP Rail will make a cash tender offer for all Shares of
CNW at $35.00 per Share (the "Offer"), and that following
consummation of the Offer, UP Rail will merge with CNW in a
transaction (the "Merger") in which all outstanding Shares
of CNW, other than Shares held by Union Pacific and its
subsidiaries, will be converted into the right to receive
$35.00 per Share in cash.
At a meeting of the CNW Board of Directors (with
Mr. Davidson absent due to his status as President of Union
Pacific) on March 16, 1995, in which I participated,
Blackstone reviewed for the Board the materials that it had
presented at the March 9, 1995 meeting, confirmed that the
materials should be considered final, and delivered a
written fairness opinion to the CNW Board of Directors. A
copy of this opinion, setting forth the assumptions made and
matters considered and limitations is attached to this
statement. The Merger Agreement was executed in the evening
of March 16, 1995.
Analyses Conducted
Blackstone reviewed certain publicly available
information relating to the business, financial condition
and operations of CNW, and certain financial and other
information, including financial forecasts, furnished to
Blackstone by CNW that is not publicly available.
Blackstone met with certain senior officers of CNW to
discuss the operations, financial condition, history and
prospects of CNW's businesses. In conducting this analysis,
Blackstone considered the terms of the Merger Agreement;
stock price data, the historical and current financial
position and the historical and projected cash flows and
results of operations of CNW; historical financial
information and stock price data with respect to certain
public companies with operations that Blackstone considered
comparable to those of CNW; and prices paid in certain other
business combinations involving companies with operations
that Blackstone considered comparable to those of CNW.
In reviewing valuations of the Shares, Blackstone
utilized the operating projections outlined in CNW's 5-Year
Business Plan (the "Business Plan"). Blackstone compared
these projections with CNW's past performance. Blackstone
reviewed CNW's stock price since the company's initial
public offering in April, 1992. In performing the analyses
described below, CNW's 1994 operating results were adjusted
to eliminate the effects of certain non-recurring charges.
References to the "current" stock price included in the
following refer to the Share price immediately prior to the
meeting of CNW's board of directors of March 9, 1995.
Trading Comparables Valuation
Blackstone reviewed the multiples of earnings at
which the shares of the following comparable public
companies trade: Burlington Northern Inc., Conrail, Inc.,
CSX Corporation, Illinois Central Corporation, Norfolk
Southern Corporation, Union Pacific and Wisconsin Central
Transportation Corp. Based on the trading multiples of
operating results for the trailing twelve months of such
companies, Blackstone applied benchmark multiples of 6.5x-
7.5x to CNW's 1994 earnings before interest, taxes,
depreciation and amortization ("EBITDA") and 8.5x-10.0x to
CNW's 1994 earnings before interest and taxes ("EBIT") to
arrive at a range of implied per Share values of $21.31-
$28.12 and $19.61-$27.13, respectively. Blackstone also
applied benchmark multiples of 1994 earnings per Share and
estimated 1995 earnings per Share of 12.5x-13.0x and 10.5x-
11.0x, respectively, to arrive at a range of implied per
Share values of $24.13-$25.09 and $26.25-$27.50,
respectively. These analyses indicated a range of implied
value of $23.00 to $27.00 per Share.
Precedent Transactions Valuation
Blackstone reviewed the multiples of earnings paid
by acquirors in recent transactions in the railroad
industry, but noted that such comparisons had to be
qualified by certain factors. In the proposed acquisition
of Santa Fe Pacific Corporation by Burlington Northern Inc.,
the price was substantially higher than the original offer
due to the highly competitive bidding which occurred between
Union Pacific and Burlington Northern Inc. The proposed
Illinois Central Corporation transaction with Kansas City
Southern Industries, Inc., which was terminated, involved an
auction with a number of interested parties. In the Kansas
City Southern Industries, Inc./Midsouth Corporation
transaction, Midsouth offered routes that were attractive
for a number of parties, and its small size enabled
financial buyers to compete in the bidding. In the
leveraged acquisition of CNW's predecessor by a Blackstone
affiliate, the transaction was consummated in light of a
competing hostile offer and at a time of significant
liquidity in the financing markets.
Blackstone also noted that, based on a preliminary
review with CNW's management of other potential strategic
buyers, viable competition to acquire CNW was unlikely to
emerge. This view was based upon Union Pacific's existing
ownership stake in CNW, the significant business
relationships between Union Pacific and CNW, and the ICC's
March 7, 1995 approval of the joint application by Union
Pacific and CNW to permit the common control of CNW and
Union Pacific (the "Control Application"), which would
likely strengthen Union Pacific's position relative to other
potential railroad industry bidders since the acquisition of
CNW by any other railroad would be subject to future ICC
approval.
Blackstone further noted that in the last major
railroad transaction involving a large existing shareholder,
Canadian Pacific Ltd.'s acquisition of the remaining 44% of
Soo Line Railroad Company ("Soo"), the original offer was at
an approximately 8% premium to Soo's stock price, which was
subsequently increased to a 19% premium. With the foregoing
qualifications, based on such acquisitions in the railroad
industry, Blackstone estimated a range of implied per Share
values of (i) $28.12-$38.35 based on multiples of EBITDA of
7.5x-9.0x, (ii) $32.15-$39.67 based on multiples of EBIT of
11.0x-12.5x, and (iii) $28.95-$38.60 based on multiples of
net income of 15.0x-20.0x. These were calculated by
applying the benchmark multiples to CNW's 1994 operating
results.
On March 7, 1995, Union Pacific filed an amendment
to its Schedule 13D with the Securities and Exchange
Commission disclosing the receipt of the ICC's approval of
the Control Application. Prior to such date, the per Share
price was 24-7/8. Hence, the Union Pacific offer of $35.00
per Share represents a 41% premium over such price. On
March 10, 1995, CNW and Union Pacific issued a press release
announcing that Union Pacific had agreed to acquire CNW,
subject to certain conditions. The $35.00 per Share price
represents a 49% premium over the average per Share price
for the 30-day period preceding this press release.
Discounted Value of Future Stand-Alone Earnings Per Share
The projections of earnings per Share in CNW's
Business Plan were $2.50 in 1995, $3.01 in 1996, $3.82 in
1997, $4.63 in 1998 and $5.60 in 1999. Based on these
projections, Blackstone estimated a matrix of per Share
values by discounting potential future Share prices of CNW.
These were estimated assuming a range of future
price/earnings multiples of 9.0x-12.0x and equity discount
rates of 13%-17%. Based on projected earnings per Share for
1997, this analysis indicated a low per Share value of
$25.12, assuming the lowest multiple and highest discount
rate, and a high per Share value of $35.90, assuming the
highest multiple and lowest discount rate. The same
analysis based on the projected earnings per Share for 1999
indicated a range of $26.90 to $41.22 per Share.
Stand-Alone Unlevered Discounted Cash Flow Valuation
Blackstone also conducted an analysis of the
stand-alone discounted cash flow valuations of CNW using
unlevered cash flows and assuming the projections in CNW's
Business Plan. Based on a capital asset pricing model
("CAPM") analysis, Blackstone utilized a range of 11%-14%
for CNW's weighted average cost of capital. Blackstone
estimated a value at the end of five years for CNW of 6.0x-
7.0x (the "exit multiple") projected 1999 EBITDA. This
analysis produced a low valuation of $32.20 per Share,
assuming an exit multiple of EBITDA of 6.0x and a weighted
average cost of capital of 14%, and a high valuation of
$46.30 per Share, assuming an exit multiple of 7.0x and a
weighted average cost of capital of 11%.
Potential Value to Union Pacific - Pro Forma Merger Analysis
Blackstone noted that, based on estimates of
potential cost savings in a combination of CNW and Union
Pacific provided to Blackstone by CNW's management, and
based on the fact that Union Pacific's borrowing costs are
likely to be lower than CNW's, an acquisition by Union
Pacific of CNW would lead to accretions to Union Pacific's
earnings per share at prices involving significant premiums
to CNW's current Share price. Blackstone's analysis
indicated a possible accretion to Union Pacific's 1995
estimated earnings per share of approximately $4.53 assuming
annual combination synergies of $40 million, $80 million and
$120 million and assuming a range of purchase prices from
$27.50 to $37.50 per Share. The analysis indicated that
Union Pacific's earnings per share could increase from as
little as $0.11 per share, assuming a $37.50 purchase price
and $40 million of annual synergies, to as much as $0.49 per
share, assuming a $27.50 purchase price and $120 million of
annual synergies. Blackstone noted that while the estimated
synergies presented by Union Pacific and CNW in the Control
Application were higher than the $40 million-$120 million
assumed in the pro forma merger analysis, CNW's management
advised Blackstone that because of the uncertainties
inherent in achieving certain of such synergies,
particularly in connection with certain revenue
enhancements, it would be appropriate to discount such
estimated synergies in the context of a valuation analysis.
Since it would be unusual for an acquiror, such as Union
Pacific, to transfer all, or substantially all, of the
combination benefits of a transaction to the selling party's
shareholders, Blackstone noted that the potential per Share
values implied by this analysis were unlikely to reflect the
price which Union Pacific would be willing to pay CNW"s
shareholders.
Value to Union Pacific - Discounted Cash Flow
Blackstone conducted an analysis of the potential
discounted cash flow value of CNW to Union Pacific using
unlevered cash flows and assuming $80 million of annual
combination synergies and also assuming the projections in
the Business Plan. The analysis indicated a range of per
Share values assuming exit multiples of 6.0x-7.0x projected
1999 EBITDA and, based on a CAPM analysis, a weighted
average cost of capital of 11% to 13% for Union Pacific.
The per Share values resulting from this analysis ranged
from a low of $44.00, assuming a 6.0x exit multiple and a
13% weighted average cost of capital, to a high of $57.70,
assuming a 7.0x exit multiple and an 11% weighted average
cost of capital. Since it would be unusual for an acquiror,
such as Union Pacific, to transfer all, or substantially
all, of the combination benefits of a transaction to the
selling party's shareholders, Blackstone noted that the
potential per Share values implied by this analysis were
unlikely to reflect the price which Union Pacific would be
willing to pay CNW's shareholders.
Leveraged Buy-out Valuation
Blackstone conducted an analysis of the values
which might be realized in a leveraged buy-out of CNW.
Blackstone notes, however, that given existing market
conditions, the financeability of a leveraged buy-out at any
meaningful premium to the current stock price of CNW would
be uncertain. Blackstone estimated that the upper end of
likely per Share values in a leveraged buy-out was $27.00.
Blackstone further noted that, assuming equity investors
would have target returns of approximately 25%, achieving
such value would require debt and equity investors to accept
the projections prepared by CNW in the Business Plan. If
equity investors were willing to fund a leveraged buy-out
based upon the Business Plan and management's estimate of
potential annual cost savings of $46 million and a potential
$20 million decrease in annual capital expenditures, then
the implied leveraged buy-out value could be increased to
approximately $36.00 per Share. However, Blackstone noted
that the ability to obtain the required level of debt
financing for such a transaction under these assumptions was
highly uncertain.
Leveraged Recapitalization Valuation
Blackstone analyzed the potential values that
might be realized in connection with a leveraged
recapitalization of CNW. Based upon the Business Plan,
Blackstone estimated that CNW could pay a one-time special
dividend to stockholders of up to $13.00 per Share, and
estimated a range of values assuming the remaining equity
(with the increased leverage) traded at multiples of
estimated 1995 earnings ranging from 8.0x to 11.0x. Based
on the foregoing, the total value to stockholders would
range from $26.09 per Share, assuming the lowest multiple,
to $30.99 per Share, assuming the highest multiple. These
values could increase to $36.68 per Share and $41.80 per
Share, respectively, if one also assumed management's
estimates of potential annual cost savings and decreases in
annual capital expenditures discussed above. However,
Blackstone noted that the ability to obtain the required
level of debt financing for such a transaction under these
assumptions was highly uncertain.
Other Considerations
In addition to the foregoing, Blackstone conducted
such other analyses and examinations as it deemed necessary
in arriving at the opinion. Blackstone did not approach
third parties to solicit indications of interest in
acquiring CNW.
In the course of its investigation, Blackstone
relied upon, and assumed the accuracy and completeness of,
publicly available information and the financial and other
information provided to Blackstone by CNW, but Blackstone
did not assume any responsibility for independent
verification of any of the foregoing information. With
respect to financial forecasts, Blackstone relied upon CNW's
assurances that they had been reasonably prepared on bases
reflecting the best currently available estimates and
judgments of CNW's management as to the future financial
performance of CNW. Blackstone expressed no view as to such
financial forecasts or the assumptions on which they were
based. In addition, Blackstone did not make an independent
evaluation or appraisal of the assets of CNW, nor was
Blackstone furnished with any such evaluation and
appraisals. Blackstone's opinion was based on circumstances
existing and disclosed to Blackstone as of March 16, 1995.
The various financial analyses employed by
Blackstone in reaching its opinion, as summarized in this
statement, should not be examined in isolation, but instead
must be considered as contributing to an overall judgment
regarding the fairness of the Offer and Merger.
Furthermore, the ranges of values presented in such analyses
were not intended in any specific instance to represent
definitive conclusions of the value of CNW. First, in
performing its analyses Blackstone made numerous assumptions
with respect to industry performance, general business,
economic, market and financial conditions and other matters,
many of which are beyond the control of Union Pacific, UP
Rail or CNW. Second, the specific analyses described in
this statement do not purport to be appraisals and, when
viewed in isolation, are not necessarily indicative of
actual values or actual future results. For example, no
public company utilized as a comparison is identical to CNW,
and none of the precedent transactions utilized as a
comparison is identical to the Offer and the Merger.
Accordingly, an analysis of publicly traded comparable
companies and precedent transactions does not afford
mathematical conclusions. Rather, it involves complex
considerations and judgments concerning differences in
financial and operating characteristics and other factors.
Nevertheless, when taken as a whole, the entire
range of analyses undertaken by Blackstone, and the ranges
of Share value thereby indicated, support Blackstone's
opinion.
Conclusion
Based upon and subject to the foregoing, it was
Blackstone's opinion, as stated in its letter to the Board
of Directors of CNW on March 16, 1995, that, as of the date
thereof, the cash consideration of $35.00 per Share to be
received by holders of the Shares of CNW pursuant to the
Offer and the Merger was fair to such holders of Shares of
CNW from a financial point of view.
The Blackstone Group
March 16, 1995
Board of Directors
Chicago and North Western
Transportation Company
165 North Canal Street
Chicago, Illinois 60606
Dear Sirs:
You have asked our opinion with respect to the fairness from
a financial point of view to the holders of Common Stock of
Chicago and North Western Transportation Company ("CNW" or
the "Company") of the cash consideration to be received by
such holders pursuant to the Agreement and Plan of Merger,
dated as of the date hereof (the "Merger Agreement"), among
CNW, Union Pacific Corporation ("UP") and an indirect wholly
owned subsidiary of UP (the "Purchaser"). The Merger
Agreement provides, among other things, that the Purchaser
will make a cash tender offer for all outstanding shares of
Common Stock of CNW at $35.00 per share (the "Offer"), and
that following consummation of the Offer, the Purchaser will
merge with CNW in a transaction (the "Merger") in which all
outstanding shares of Common Stock of CNW, other than shares
held by UP and its subsidiaries, will be converted into the
right to receive $35.00 per share in cash.
In arriving at our opinion, we have reviewed the Merger
Agreement and related documents, certain publicly available
information relating to the business, financial condition
and operations of CNW, and certain financial and other
information, including financial forecasts, furnished to us
by CNW that is not publicly available. We have met with
certain senior officers of the Company to discuss the
operations, financial condition, history and prospects of
CNW's businesses.
In conducting our analysis, we have considered the terms of
the Merger Agreement; stock price data, the historical and
current financial position and the historical and projected
cash flows and results of operations of the Company;
historical financial information and stock price data with
respect to certain public companies with operations that we
considered comparable to those of CNW; and prices paid in
certain other business combinations involving companies with
operations that we considered comparable to CNW. In
addition to the foregoing, we have conducted such other
analyses and examinations as we have deemed necessary in
arriving at our opinion. We have not approached third
parties to solicit indications of interest in acquiring the
Company.
In the course of our investigation, we have relied upon, and
have assumed the accuracy and completeness of, publicly
Board of Directors
Chicago and North Western
Transportation Company
Page 2
available information and the financial and other
information provided to us by the Company, but we have not
assumed any responsibility for independent verification of
any of the foregoing information. With respect to financial
forecasts, we have relied upon the Company's assurances that
they have been reasonably prepared on bases reflecting the
best currently available estimates and judgments of the
Company's management as to the future financial performance
of CNW. We express no view as to such financial forecasts
or the assumptions on which they were based. In addition,
we have not made an independent evaluation or appraisal of
the assets of CNW, nor have we been furnished with any such
evaluation and appraisals. Our opinion is based on
circumstances existing and disclosed to us as of the date
hereof.
We have acted as financial advisor to the Company in
connection with the Offer and the Merger and will receive a
fee for our services, including for rendering this opinion.
In addition, an affiliate of The Blackstone Group L.P. owns
shares of Common Stock of the Company amounting to less than
0.1% of the total issued and outstanding Common Stock, and a
partner of The Blackstone Group L.P. is a member of the
Board of Directors of the Company. The Blackstone Group
L.P. has performed various financial advisory services for
the Company in the past and has received fees for such
services.
Based upon and subject to the foregoing, it is our opinion
that, as of the date hereof, the cash consideration to be
received by holders of Common Stock of CNW pursuant to the
Offer and the Merger is fair to such holders of Common Stock
of CNW from a financial point of view.
Very truly yours,
THE BLACKSTONE GROUP L.P.
By: /s/ J. Tomilson Hill
J. Tomilson Hill
STATE OF NEW YORK )
: ss:
COUNTY OF NEW YORK )
J. TOMILSON HILL, being duly sworn, states that he
is a General Partner of Blackstone Group Holdings, L.P., an
affiliate of The Blackstone Group, L.P.; that he has
knowledge of the matters set forth in the attached
statement; and that all statements made and matters set
forth therein are true and correct to the best of his
knowledge, information and belief.
/s/ J. Tomilson Hill
J. Tomilson Hill
Subscribed and sworn to
before me this 4th day
of April, 1995
/s/ Adele A. Giuliano
Notary Public
ADELE A. GIULIANO
Notary Public, State of New York
No. 24-4965431
Qualified in Kings County
Certificate filed in New York County
Commission Expires 4/96
