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Filing under Rule 425
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Filer: Burlington Northern Santa Fe Corporation
Companies that are the subject to the filing:
Canadian National Railway Company
North American Railways, Inc.
Registration Statement No. 333-94397
[BNSF LOGO] NEWS
Contact: Richard Russack FOR IMMEDIATE RELEASE
(817) 352-6425
Several Economists Testify at STB Hearing Citing
Rail Industry as `Success Story' For Deregulation
WASHINGTON, D.C., March 9, 2000 - In testimony prepared for presentation this
afternoon before the Surface Transportation Board (STB), several of the nation's
leading economists will tell the Board that the revitalization of the U.S. rail
industry is one of the nation's public policy success stories.
In different ways, they urge the STB not to impose any rulings that would
dampen the incentive for railroads to maintain and upgrade their infrastructure
and for investors to finance such activity. The economists are participating in
the third day of a four-day hearing, STB Ex Parte No. 582, to discuss recent
major railroad consolidations and the present and future structure of the North
American railroad industry.
The economists are: Professor Kenneth J. Arrow, Joan Kenney Professor of
Economics Emeritus at Stanford University, and 1972 winner of the Nobel Memorial
Prize in Economic Science; Robert W. Hahn, Director of the AEI-Brookings Joint
Center for Regulatory Studies, a Research Associate at Harvard University and a
Resident Scholar at the American Enterprise Institute; Robert S. Hamada, Edward
Eagle Brown Distinguished Service Professor of Finance and Dean of the Graduate
School of Business at the University of Chicago; and Joseph P. Kalt, Ford
Foundation Professor of International Political Economy at the John F. Kennedy
School of Government at Harvard University, and Chair of the Economic and
Quantitative Methods Program; and Amy Bertin Candell, a senior economist at
Lexicon, Inc., an economic consulting firm in Cambridge, Massachusetts.
-more-
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Several Economists Testify At STB Hearing / Page Two
Among the major points made by these economists in their testimony are:
Professor Arrow - "Delays in the completion of efficient mergers resulting from
preplanning would result in harm to consumers. Thus, the preplanning process
offers considerable costs, but little if any additional value beyond that
achieved through standard regulatory review of proposed mergers." In addition,
Prof. Arrow said, "...It is hard to see why the difficulties of some railroads
in implementing the improved connections that should have come with
consolidation should be used to prevent others from achieving these gains. To
allow this argument would have perverse incentives; service failure would be
rewarded by shelter from competition...the assumption that the proposed merger
(BNSF/CN combination) would have effects which might call for `strategic
response' by other railroads amounts to saying that competition will increase,
which most of us would interpret as a benefit of the proposed merger. I
therefore conclude that little if any additional value in evaluating mergers and
acquisitions will be derived from an extensive preplanning procedure, while the
costs of such procedures will be high." (Emphasis added)
Dr. Hahn - "The lessons of the past decades, however, show that the Board's
existing policy is the correct one, one that is validated by experience in the
rail industry and other sectors of the economy. In contrast, the alternative
policies simply would not work, or at best, would lead to significant reductions
in economic benefits as the gains of desirable industry restructuring are
deferred or lost entirely." Dr. Hahn also said, "In a free-market system,
entrepreneurs compete by putting their money at risk. They are...in a better
position than the government to try to identify ways of making industry more
efficient and effective, including how best to restructure... Regulators should
not postpone today's beneficial outcomes because some competitors are having
problems of their own...Regulators should not assume a central planning
role...Government can play an important role in helping to assure that ongoing
changes in industry structure continue to benefit consumers." (Emphasis added)
Dean Hamada - "If the STB were to issue ...moratoriums on consolidation...there
is significant risk that railroads and railroad investors would interpret the
rulings as a sign that the STB was becoming more interventionist...the actions
would be interpreted as a sign that the STB was moving in a `re-regulatory'
direction, away from the reforms that culminated with the Staggers Act of
1980...Increased regulatory uncertainty would dampen railroads incentives to
make the investments needed to maintain and upgrade the railroad infrastructure.
This is a cost that the STB needs to take into account when making its decisions
in Ex Parte No. 582." (Emphasis added)
-more-
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Several Economists Testify at STB Hearing / Page Three
Professor Kalt and Dr. Candell -- "Nearly all measures available demonstrate
that the improvements in the rail industry have benefited shippers, railroads,
and the economy. As a result, this efficient rail system has become a key
component in supporting the flow of goods and materials in an internationally
competitive economy...when consolidations have been largely end-to-end in nature
and have been properly implemented, they have continued to build more integrated
and efficient networks. Vague claims made about reductions in the overall number
of Class I railroads are misleading. No single shipper ever had access to the
dozens and dozens of railroads that existed before 1980. As railroads have
consolidated, the STB and the ICC have been vigilant in protecting rail options
of shippers. In the context of merger policy, there is now strong precedent that
preserves options for a shipper who had access to two rail options prior to the
proposed merger. Indeed, no merging parties seem to ever come before the Board
anymore without pre-conditioning their transaction by preserving access to at
least two rail options. This bespeaks clear and forceful policy aimed at
protecting competition and the public interest." They further stated, "It does
not make sense to block or delay efficient mergers that provide benefits to
consumers today or to enact policy that tries to generically determine the
future structure of the U.S. rail industry...When careful review determines that
a transaction is efficient and does not harm competition, it should be allowed
to take place expeditiously so that both consumers and railroads can take
advantage of productivity improvements and innovations that flow from these
consolidations." (Emphasis added)
Burlington Northern Santa Fe Corporation and Canadian National Railway
Company announced their proposed combination through a new company, North
American Railways, Inc., on Dec. 20, 1999. The combination will create a rail
system stretching 50,000 miles, linking eight Canadian provinces and 33 states
in the western and central United States, and employing 67,000 people. The
combined system will offer North American rail shippers greatly expanded single-
line service options and gateway choices; a coordinated marketing plan; reduced
transit times; enhanced reliability; unified customer service information,
including easier tracking, tracing and ordering; simplified billing; greater
capacity; and improved asset utilization.
# # #
Through its subsidiary, The Burlington Northern and Santa Fe Railway Company,
BNSF, headquartered in Fort Worth, Texas, operates one of the largest rail
networks in North America with 33,500 route miles of track covering 28 states
and two Canadian provinces. CN and North American Railways, Inc. have filed a
registration statement on Form F-4/S-4 with the United States Securities and
Exchange Commission (SEC) in connection with the securities to be issued in the
combination. The registration statement has not been declared effective. This
filing also includes the preliminary proxy statement for the shareholders'
meetings to be held for approval of the combination. Investors should read this
document and other documents filed with the SEC by CN, BNSF and North American
Railways, Inc. about the combination because they contain important information.
These documents may be obtained for free at the SEC's Web site, www.sec.gov.
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Other filings made by CN on Forms 40-F and 6-K may be obtained for free from the
CN Corporate Secretary's office at (514) 399-6569. Other filings made by BNSF on
Forms 10-K, 10-Q and 8-K may be obtained for free from the BNSF Corporate
Secretary's office at (817) 352-6856. For information concerning participants in
CN's solicitation of proxies for approval of the combination, see "Certain
Information Concerning Participants" filed by CN under Rule 14a-12. For
information concerning participants in BNSF's solicitation of proxies for
approval of the combination, see "Certain Information Concerning Participants"
filed by BNSF on Schedule 14A under Rule 14a-12.
