<PAGE>
RULE 424(B)(3)
REGISTRATION NO. 33-56183
[LOGO OF BURLINGTON NORTHERN INC. APPEARS HERE]
BURLINGTON NORTHERN INC.
3800 CONTINENTAL PLAZA
777 MAIN STREET
FORT WORTH, TEXAS 76102-5384
October 28, 1994
DEAR STOCKHOLDER:
On October 26, 1994, your Board of Directors unanimously approved an increase
in the exchange ratio in the proposed merger of Santa Fe Pacific Corporation
("SFP") with and into Burlington Northern Inc. ("BNI") from 0.27 shares of BNI
common stock per share of SFP common stock to 0.34 shares of BNI common stock
per share of SFP common stock, and BNI and SFP entered into an amendment to our
Merger Agreement reflecting the revised exchange ratio. All other terms of the
proposed BNI-SFP merger remain the same.
The attached Supplemental Joint Proxy Statement/Prospectus includes
information concerning the revised Merger Agreement, describes a number of
recent developments since the date of the Joint Proxy Statement/Prospectus
previously delivered to you (the "Original Joint Proxy Statement/Prospectus")
and includes other important information relating to BNI, SFP and the proposed
merger. This Supplemental Joint Proxy Statement/Prospectus modifies and
supersedes certain information contained in the Original Joint Proxy
Statement/Prospectus and should be read in conjunction with the Original Joint
Proxy Statement/Prospectus. Both documents include important information, and
you are urged to give these documents your careful attention and consideration.
The Special Meeting of Stockholders of BNI at which the merger will be
considered and voted upon will be held at Burlington Northern Railroad Company,
3017 Lou Menk Drive, Fort Worth, Texas 76131-2815, on November 18, 1994 at
10:00 a.m., Fort Worth time.
The merger is contingent upon, among other things, approval by the Interstate
Commerce Commission (the "ICC"). The merger would be consummated shortly after
ICC approval is obtained and other conditions to the merger are satisfied or
waived.
The merger will provide significant benefits to BNI's stockholders. As you
have seen in the Original Joint Proxy Statement/Prospectus, in their
application to the ICC for approval of the merger, BNI and SFP state that the
merger is expected to result in an increase in operating income of
approximately $560 million per year, most of which will be achieved in the
first three years following the merger. The application further states that
when these benefits are realized, this will result in combined operating income
in excess of $1.5 billion per year and a combined operating ratio of 79
percent. There can be no assurance that these potential benefits will be
realized or that the ICC will not impose conditions on the operations of the
merged entity that will affect its ability to fully achieve any one or more of
these benefits. Moreover, in order to achieve the increases in operating
revenue mentioned above, it is expected that certain nonrecurring cash costs
would be incurred, which would include relocation, employee separation and
retraining and capital improvement costs. The ICC application states that those
costs are approximately $350 million, a substantial portion of which will be
incurred during the first year following consummation of the BNI-SFP merger. A
more detailed description of what BNI and SFP have stated in the ICC
application, as well as some important caveats about this information, is
provided at pages 62 through 64 of the Original Joint Proxy
Statement/Prospectus.
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Your Board of Directors believes that the merger is fair to and in the best
interests of BNI and its stockholders, and will create a strong, new rail
carrier with a diversified traffic base and excellent financial prospects. YOUR
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE MERGER.
Approval of the merger requires the affirmative vote of a majority of the
outstanding shares of BNI common stock.
Whether or not you plan to attend the Special Meeting, PLEASE COMPLETE, SIGN
AND DATE THE ACCOMPANYING PROXY CARD AND RETURN IT IN THE ENCLOSED ENVELOPE,
WHICH REQUIRES NO POSTAGE. IF YOU HAVE ALREADY SUBMITTED A PROXY CARD, YOU DO
NOT NEED TO SUBMIT THE ACCOMPANYING PROXY CARD UNLESS YOU WISH TO CHANGE YOUR
VOTE. A VOTE INDICATED ON A PREVIOUSLY SUBMITTED PROXY CARD WILL BE DEEMED TO
BE A CORRESPONDING VOTE ON THE MERGER, INCLUDING THE INCREASED EXCHANGE RATIO,
UNLESS YOU SUBMIT A SUBSEQUENT PROXY CARD CHANGING YOUR VOTE. Your prompt
cooperation is greatly appreciated.
If you are present at the Special Meeting, you may, of course, withdraw your
proxy and vote your shares in person.
Very truly yours,
/s/ Gerald Grinstein
Gerald Grinstein
Chairman and
Chief Executive Officer
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BURLINGTON NORTHERN INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 18, 1994
TO THE STOCKHOLDERS OF BURLINGTON NORTHERN INC.:
A Special Meeting of the Stockholders of Burlington Northern Inc. ("BNI")
will be held at Burlington Northern Railroad Company, 3017 Lou Menk Drive, Fort
Worth, Texas, 76131-2815, on November 18, 1994, at 10:00 a.m., Fort Worth time,
for the purpose of considering and voting upon the following:
1. The approval and adoption of an Agreement and Plan of Merger dated as
of June 29, 1994 between BNI and Santa Fe Pacific Corporation ("SFP"), as
amended by the Amendment thereto dated as of October 26, 1994 (as so
amended, the "Merger Agreement"). A copy of the Amendment is set forth as
Appendix A to the attached Supplemental Joint Proxy Statement/Prospectus.
Pursuant to the Merger Agreement, among other things, (i) SFP is to merge
with and into BNI (the "Merger"), with BNI to be the surviving corporation
in the Merger, (ii) each share of common stock, par value $1.00 per share,
of SFP outstanding at the effective time of the Merger (other than shares
held by SFP as treasury stock or held by BNI or its subsidiaries) will be
converted into the right to receive 0.34 shares of common stock, no par
value, of BNI and (iii) BNI will issue up to 73,100,000 shares of its
common stock to SFP stockholders, all as more fully set forth in the Merger
Agreement and described in the attached Supplemental Joint Proxy
Statement/Prospectus and the Joint Proxy Statement/Prospectus of BNI and
SFP dated October 12, 1994 previously distributed to BNI stockholders (the
"Original Joint Proxy Statement/Prospectus"). The Supplemental Joint Proxy
Statement/Prospectus modifies and supersedes certain information in the
Original Joint Proxy Statement/Prospectus and should be read in conjunction
with the Original Joint Proxy Statement/Prospectus.
2. Such other business as may properly come before the Special Meeting or
any adjournment or postponement thereof.
Only stockholders of record at the close of business on October 19, 1994 are
entitled to receive notice of and to vote at the Special Meeting or any
adjournment or postponement thereof.
Whether or not you expect to attend the Special Meeting, please fill in, date
and sign the accompanying proxy card and mail it promptly in the enclosed
prepaid return envelope. If you have already submitted a proxy card, you do not
need to submit the accompanying proxy card unless you wish to change your vote.
A vote indicated on a previously submitted proxy card will be deemed to be a
corresponding vote on the Merger Agreement unless you submit a subsequent proxy
card changing your vote. If you attend the Special Meeting, you may vote in
person if you wish, even if you have previously returned your proxy card.
By Order of the Board of Directors.
/s/ Edmund W. Burke
Edmund W. Burke
Executive Vice President,
Law and Secretary
Fort Worth, Texas
October 28, 1994
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BURLINGTON NORTHERN INC.
AND
SANTA FE PACIFIC CORPORATION
----------------
SUPPLEMENTAL JOINT PROXY STATEMENT
FOR SPECIAL MEETINGS OF STOCKHOLDERS
TO BE HELD NOVEMBER 18, 1994
----------------
BURLINGTON NORTHERN INC.
PROSPECTUS SUPPLEMENT
COMMON STOCK
----------------
This Supplemental Joint Proxy Statement/Prospectus relates to the proposed
merger (the "Merger") of Santa Fe Pacific Corporation, a Delaware corporation
("SFP"), with and into Burlington Northern Inc., a Delaware corporation
("BNI"), pursuant to the Agreement and Plan of Merger dated as of June 29, 1994
between BNI and SFP, as amended by the Amendment thereto dated as of October
26, 1994 (as so amended, the "Merger Agreement"). If the proposed Merger is
consummated, each outstanding share of common stock, par value $1.00 per share,
of SFP ("SFP Common Stock"), other than shares of SFP Common Stock held by SFP
as treasury stock or held by BNI or its subsidiaries (all of which will be
canceled), will be converted into the right to receive 0.34 shares of common
stock, no par value, of BNI ("BNI Common Stock"). The consummation of the
Merger is subject to various conditions, including, among other things,
approval by the stockholders of each of BNI and SFP at their respective Special
Meetings, described herein and in the Original Joint Proxy Statement/Prospectus
referred to below, and approval by the Interstate Commerce Commission (the
"ICC"). This Supplemental Joint Proxy Statement/Prospectus is being furnished
to stockholders of each of BNI and SFP in connection with the solicitation of
proxies to be used at the respective Special Meetings of BNI and SFP to be held
for the purposes described herein and in the Original Joint Proxy
Statement/Prospectus referred to below.
This Supplemental Joint Proxy Statement/Prospectus, together with the
Original Joint Proxy Statement/Prospectus referred to below, also constitutes a
prospectus of BNI with respect to up to 73,100,000 shares of BNI Common Stock
issuable to SFP stockholders in the Merger.
This Supplemental Joint Proxy Statement/Prospectus modifies and supersedes
certain information included in the Joint Proxy Statement/Prospectus dated
October 12, 1994 of BNI and SFP previously distributed to BNI and SFP
stockholders (the "Original Joint Proxy Statement/Prospectus") and should be
read in conjunction with the Original Joint Proxy Statement/Prospectus.
All information herein concerning BNI has been furnished by BNI, and all
information herein concerning SFP has been furnished by SFP. BNI has
represented and warranted to SFP, and SFP has represented and warranted to BNI,
that the particular information so furnished is true and complete.
This Supplemental Joint Proxy Statement/Prospectus and the accompanying forms
of proxy are first being mailed to stockholders of each of BNI and SFP on or
about October 29, 1994.
----------------
THE SECURITIES TO BE ISSUED IN CONNECTION WITH THE MERGER HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
SUPPLEMENTAL JOINT PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
----------------
The date of this Supplemental Joint Proxy Statement/Prospectus is October 28,
1994.
<PAGE>
AVAILABLE INFORMATION
Each of BNI and SFP is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). The reports, proxy
statements and other information filed by each of BNI and SFP with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549 and should be available at the Commission's Regional Offices at 7
World Trade Center, Thirteenth Floor, New York, New York 10048 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material
may also be obtained from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition,
material filed by each of BNI and SFP may be inspected at the offices of the
New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005 and
also at the offices of the Chicago Stock Exchange, Incorporated, 440 South
LaSalle Street, One Financial Place, Chicago, Illinois 60605 and the Pacific
Stock Exchange Incorporated, 301 Pine Street, San Francisco, California 94104.
BNI has filed with the Commission two Registration Statements on Form S-4
(collectively, together with any amendments thereto, the "Registration
Statements") under the Securities Act of 1933, as amended (the "Securities
Act"), relating to the shares of BNI Common Stock offered pursuant to this
Supplemental Joint Proxy Statement/Prospectus and the Original Joint Proxy
Statement/Prospectus. This Supplemental Joint Proxy Statement/Prospectus and
the Original Joint Proxy Statement/Prospectus do not contain all of the
information set forth in the Registration Statements and the exhibits filed by
BNI, certain portions of which have been omitted pursuant to the rules and
regulations of the Commission and to which portions reference is hereby made
for further information with respect to BNI, SFP and the securities offered
hereby. The Registration Statements and the exhibits thereto may be inspected
without charge at the offices of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and copies may be obtained from the Commission at
prescribed rates.
This Supplemental Joint Proxy Statement/Prospectus modifies and supersedes
certain of the information included in the Original Joint Proxy
Statement/Prospectus and should be read in conjunction with the Original Joint
Proxy Statement/Prospectus.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission by BNI pursuant
to the Exchange Act are incorporated by reference in this Supplemental Joint
Proxy Statement/Prospectus:
1. BNI's Annual Report on Form 10-K for the year ended December 31, 1993
(which incorporates by reference certain information from BNI's Proxy
Statement relating to the 1994 Annual Meeting of Stockholders and
includes Amendment No. 1 on Form 10-K/A dated October 5, 1994);
2. BNI's Quarterly Reports on Form 10-Q for the quarters ended March 31 and
June 30, 1994 (including Amendment No. 1 on Form 10-Q/A each dated
October 5, 1994, respectively);
3. BNI's Current Reports on Form 8-K dated June 29, 1994 and October 6,
1994; and
4. BNI's Registration Statement on Form 8-A dated July 15, 1986.
The following documents previously filed with the Commission by SFP pursuant
to the Exchange Act are incorporated by reference in this Supplemental Joint
Proxy Statement/Prospectus:
1. SFP's Annual Report on Form 10-K for the year ended December 31, 1993
(which incorporates by reference certain information from SFP's Proxy
Statement relating to the 1994 Annual Meeting of Stockholders and
includes both Amendment No. 1 and Amendment No. 2 on Form 10-K/A dated
June 29, 1994 and October 5, 1994, respectively);
2
<PAGE>
2. SFP's Quarterly Reports on Form 10-Q for the quarters ended March 31 and
June 30, 1994 (including Amendment No. 1 thereto on Form 10-Q/A each
dated October 5, 1994, respectively);
3. SFP's Current Reports on Form 8-K dated June 29, 1994 (including
Amendment No. 1 thereto on Form 8-K/A dated July 29, 1994), August 3,
1994 (including Amendment No. 1 thereto on Form 8-K/A dated October 5,
1994), October 5, 1994 and October 19, 1994; and
4. SFP's Registration Statement on Form 8-B filed with the Commission on
November 29, 1983 (Item 4 of which incorporates by reference the
description of the SFP Common Stock as set forth under the sections
"Comparison of Certain Provisions of Certificates of Incorporation and
By-Laws of SFSP, Santa Fe and Southern Pacific" and "Description of
Common Stock of SFSP" in the Joint Proxy Statement-Prospectus of SFP and
Southern Pacific Corporation dated November 10, 1983).
----------------
All documents filed by BNI and SFP pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Supplemental Joint Proxy
Statement/Prospectus and prior to the date of the Special Meetings of the
stockholders of BNI and SFP shall be deemed to be incorporated by reference in
this Supplemental Joint Proxy Statement/Prospectus and to be a part hereof from
the dates of filing such documents or reports. Any statement contained herein
or in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Supplemental
Joint Proxy Statement/Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which is also incorporated
or deemed to be incorporated herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Supplemental Joint Proxy
Statement/Prospectus.
----------------
THIS SUPPLEMENTAL JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY
REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS
(OTHER THAN CERTAIN EXHIBITS TO DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE), AS WELL AS THE ORIGINAL JOINT PROXY
STATEMENT/PROSPECTUS, ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON TO WHOM A COPY
OF THIS SUPPLEMENTAL JOINT PROXY STATEMENT/PROSPECTUS HAS BEEN DELIVERED UPON
WRITTEN OR ORAL REQUEST, IN THE CASE OF BNI DOCUMENTS (INCLUDING THE ORIGINAL
JOINT PROXY STATEMENT/PROSPECTUS), TO BURLINGTON NORTHERN INC., 3800
CONTINENTAL PLAZA, 777 MAIN STREET, FORT WORTH, TEXAS 76102-5384, ATTENTION:
CORPORATE SECRETARY, TELEPHONE NUMBER (817) 333-7951, AND, IN THE CASE OF SFP
DOCUMENTS (INCLUDING THE ORIGINAL JOINT PROXY STATEMENT/PROSPECTUS), TO SANTA
FE PACIFIC CORPORATION, 1700 EAST GOLF ROAD, SCHAUMBURG, ILLINOIS 60173-5860,
ATTENTION: CORPORATE SECRETARY, TELEPHONE NUMBER (708) 995-6000. IN ORDER TO
ENSURE DELIVERY PRIOR TO THE SPECIAL MEETINGS, REQUESTS SHOULD BE RECEIVED BY
NOVEMBER 9, 1994.
----------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
NOT CONTAINED IN THIS SUPPLEMENTAL JOINT PROXY STATEMENT/PROSPECTUS OR THE
ORIGINAL JOINT PROXY STATEMENT/PROSPECTUS IN CONNECTION WITH THE OFFERING AND
THE SOLICITATIONS MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY BNI OR SFP.
THIS SUPPLEMENTAL JOINT PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, ANY SECURITIES, OR THE
SOLICITATION OF A PROXY, IN ANY JURISDICTION IN WHICH, OR TO ANY PERSON TO
WHOM, IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS SUPPLEMENTAL JOINT PROXY STATEMENT/PROSPECTUS NOR ANY
DISTRIBUTION OF THESE SECURITIES MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY INFERENCE THAT THERE HAS NOT BEEN ANY CHANGE IN THE INFORMATION SET
FORTH HEREIN OR IN THE AFFAIRS OF EITHER BNI OR SFP SINCE THE DATE HEREOF.
3
<PAGE>
INTRODUCTION
On June 29, 1994, Burlington Northern Inc. ("BNI") and Santa Fe Pacific
Corporation ("SFP") entered into an Agreement and Plan of Merger (the "Original
Merger Agreement") pursuant to which SFP would be merged with and into BNI and
stockholders of SFP would become stockholders of BNI. Pursuant to the Original
Merger Agreement, each share of common stock, par value $1.00 per share, of SFP
(the "SFP Common Stock") would have been converted into 0.27 shares of common
stock, no par value per share, of BNI (the "BNI Common Stock") upon
consummation of the merger contemplated thereby. Special meetings of the
stockholders of BNI and SFP to consider and approve the Original Merger
Agreement were scheduled for November 18, 1994, and a Joint Proxy
Statement/Prospectus dated October 12, 1994 of BNI and SFP (the "Original Joint
Proxy Statement/Prospectus") was distributed by BNI and SFP to their respective
stockholders.
On October 26, 1994, BNI and SFP entered into an Amendment to the Original
Merger Agreement (as so amended, the "Merger Agreement") to increase the
exchange ratio in the proposed merger from 0.27 shares of BNI Common Stock per
share of SFP Common Stock to 0.34 shares of BNI Common Stock per share of SFP
Common Stock (the "Exchange Ratio"). All other terms of the proposed merger are
identical to those set forth in the Original Merger Agreement and the Original
Joint Proxy Statement/Prospectus. For purposes of this Supplemental Joint Proxy
Statement/Prospectus, the term "Merger" shall refer to the merger of SFP with
and into BNI pursuant to the terms of the Merger Agreement.
This Supplemental Joint Proxy Statement/Prospectus modifies and supersedes
certain information contained in the Original Joint Proxy Statement/Prospectus
to reflect the increase in the exchange ratio and to describe certain
significant recent developments. This Supplemental Joint Proxy
Statement/Prospectus also includes certain additional information relating to
the increase in the exchange ratio, including revised pro forma combined
financial information giving effect to the increase. This Supplemental Joint
Proxy Statement/Prospectus should be read in conjunction with the Original
Joint Proxy Statement/Prospectus.
This Supplemental Joint Proxy Statement/Prospectus is being furnished to
stockholders of BNI in connection with the solicitation of proxies by the BNI
Board of Directors for use at the Special Meeting of Stockholders of BNI (the
"BNI Special Meeting") to be held at Burlington Northern Railroad Company, 3017
Lou Menk Drive, Forth Worth, Texas 76131-2815, on November 18, 1994 at 10:00
a.m., Fort Worth time, and at any adjournment or postponement thereof.
This Supplemental Joint Proxy Statement/Prospectus is also being furnished to
the stockholders of SFP in connection with the solicitation of proxies by the
SFP Board of Directors for use at the Special Meeting of Stockholders of SFP
(the "SFP Special Meeting") to be held at the Hyatt Regency O'Hare, 9300 West
Bryn Mawr Avenue, Rosemont, Illinois on November 18, 1994 at 3:00 p.m., Chicago
time, and at any adjournment or postponement thereof.
At the BNI Special Meeting and the SFP Special Meeting, the common
stockholders of BNI and SFP, respectively, will be asked to adopt and approve
the Merger Agreement between BNI and SFP, pursuant to which SFP is to merge
with and into BNI, with BNI to be the surviving corporation in the Merger. In
the Merger, each holder of SFP Common Stock will receive 0.34 shares of BNI
Common Stock per share of SFP Common Stock.
All information herein concerning BNI has been furnished by BNI, and all
information herein concerning SFP has been furnished by SFP. BNI has
represented and warranted to SFP, and SFP has represented and warranted to BNI,
that the particular information so furnished is true and complete.
Unless otherwise defined in this Supplemental Joint Proxy
Statement/Prospectus, all capitalized terms used herein have the meanings set
forth in the Original Joint Proxy Statement/Prospectus.
This Supplemental Joint Proxy Statement/Prospectus and the accompanying forms
of proxy are first being mailed to stockholders of BNI and SFP on or about
October 29, 1994.
4
<PAGE>
THE SPECIAL MEETINGS
PURPOSE OF THE BNI AND SFP SPECIAL MEETINGS
The purpose of the BNI and SFP Special Meetings is to consider and vote upon
the adoption and approval of the Merger Agreement. Pursuant to the Merger
Agreement, upon consummation of the Merger, SFP will be merged with and into
BNI, with each share of SFP Common Stock to be converted into the right to
receive 0.34 shares of BNI Common Stock. Except for the increase in the
exchange ratio, the terms of the Merger Agreement are identical to those of the
Original Merger Agreement.
EACH OF THE BOARDS OF DIRECTORS OF BNI AND SFP HAS, BY UNANIMOUS VOTE,
APPROVED THE MERGER AGREEMENT AND RECOMMENDS THAT ITS STOCKHOLDERS VOTE FOR
APPROVAL OF THE MERGER AGREEMENT.
VOTING AND REVOCATION OF PROXIES
WHITE proxy cards for use at either the BNI Special Meeting or the SFP
Special Meeting, as the case may be, accompany this Supplemental Joint Proxy
Statement/Prospectus. A stockholder may use the appropriate WHITE proxy card if
he or she is unable to attend the meeting in person or wishes to have his or
her shares voted by proxy even if he or she does attend the meeting. If a
stockholder has already submitted a proxy card, he or she does not need to
submit an additional proxy card unless the stockholder wishes to change his or
her vote. A vote indicated on a previously submitted proxy card will be deemed
to be a corresponding vote on the Merger Agreement unless a stockholder submits
a subsequent proxy card changing his or her vote. A proxy may be revoked by the
person giving it at any time before it is exercised by providing written notice
of such revocation to the Secretary of BNI or SFP, as the case may be, by
submitting a proxy having a later date, or by appearing at the meeting and
electing to vote in person. Any proxy validly submitted and not revoked will be
voted in the manner specified therein by the stockholder. IF NO SPECIFICATION
IS MADE, SHARES OF BNI COMMON STOCK OR SFP COMMON STOCK, AS THE CASE MAY BE,
REPRESENTED BY PROXY WILL BE VOTED FOR APPROVAL OF THE MERGER AGREEMENT.
Because approval of the Merger Agreement by BNI stockholders requires the
affirmative vote of a majority of the shares of BNI Common Stock outstanding as
of the Record Date, and approval of the Merger Agreement by SFP stockholders
requires the affirmative vote of a majority of the shares of SFP Common Stock
outstanding as of the Record Date, abstentions and broker non-votes will have
the effect of a vote against approval of the Merger Agreement. Other than any
action that might be taken by Union Pacific Corporation in opposition to the
Merger Agreement, neither BNI's nor SFP's Board of Directors knows of any other
matter that will be presented for action at either of the Special Meetings. If,
however, any other matter properly comes before either of the Special Meetings,
the persons named in the proxy or their substitutes will vote thereon in
accordance with their judgment. See "Other Business at the Special Meetings;
Stockholder Proposals."
SOLICITATION OF PROXIES
In addition to Kissel-Blake, Inc., Lazard Freres & Co. ("Lazard") will also
assist in the solicitation of proxies by BNI. Lazard will not receive any
additional compensation for such assistance. Lazard's compensation arrangements
with BNI for services rendered in connection with the Merger are described in
"The Merger--Opinions of Financial Advisors--Opinion of Lazard" in the Original
Joint Proxy Statement/Prospectus.
In addition to D.F. King & Co., Inc. and MacKenzie Partners, Inc., Goldman,
Sachs & Co. ("Goldman Sachs") will also assist in the solicitation of proxies
by SFP. Goldman Sachs will not receive any additional compensation for such
assistance. Goldman Sachs' compensation arrangements with SFP for services
rendered in connection with the Merger are described in "The Merger--Opinions
of Financial Advisors--Opinion of Goldman Sachs" in the Original Joint Proxy
Statement/Prospectus.
5
<PAGE>
RECENT DEVELOPMENTS
Set forth below is a description of certain significant developments, which
description should be read in conjunction with the Original Joint Proxy
Statement/Prospectus.
On October 5, 1994, Mr. Drew Lewis, the Chairman and Chief Executive Officer
of Union Pacific Corporation ("UPC"), called Mr. Robert D. Krebs, the Chairman,
President and Chief Executive Officer of SFP, and stated that UPC wished to
acquire SFP and that Mr. Lewis wanted to meet with Mr. Krebs. Mr. Lewis further
stated that he was going to call Mr. Gerald Grinstein, the Chairman and Chief
Executive Officer of BNI, to request a meeting with him as well. Mr. Krebs told
Mr. Lewis that SFP was already a party to a merger agreement, that it was
unlikely that the ICC would permit a merger between SFP and UPC, and that
therefore there was no reason to have a meeting. Mr. Lewis replied that UPC
intended to make public a proposal if no meeting occurred and urged that a
meeting be held. The two men then agreed that Mr. Krebs would consult his
counsel. After doing so, Mr. Krebs called Mr. Lewis back and agreed to a
meeting. During the conversations, Mr. Lewis told Mr. Krebs that UPC had looked
at Southern Pacific and at SFP, and had decided that SFP was the company to
break up. Mr. Lewis also stated that UPC would offer concessions to BNI to
persuade it to acquiesce to UPC's proposal.
Mr. Lewis then called Mr. Grinstein, stated that UPC wanted to acquire SFP
and asked to see Mr. Grinstein. Mr. Grinstein declined to see Mr. Lewis.
Mr. Lewis, Mr. Richard Davidson, President of UPC, Mr. Krebs, and Mr. Robert
A. Helman, SFP's counsel, had a meeting in the late afternoon of October 5. At
the meeting, Mr. Helman stated that SFP is subject to a binding merger
agreement and that it is unlikely that a UPC-SFP combination would be approved
by the ICC. Mr. Helman also stated that UPC had misled SFP because, earlier in
1994, when Mr. Krebs returned an unsolicited telephone call from Mr. Lewis, Mr.
Lewis had stated that if SFP made its deal with BNI, UPC would not oppose it.
Mr. Lewis denied having made that statement, contending that what he had
stated was that UPC would not oppose a BNI-SFP merger subject to an evaluation
of its merits. Mr. Lewis then placed a written proposal (the "UPC Proposal") on
Mr. Krebs' desk and, as Mr. Lewis was leaving, stated that Mr. Krebs was making
a mistake, that UPC would offer more--$20 per share--than the amount provided
for in the UPC Proposal, and that UPC would consider using a voting trust for
the proposed transaction. Mr. Lewis and Mr. Davidson then left SFP's
headquarters, where the meeting had taken place.
In the UPC Proposal, UPC proposed to acquire SFP in a tax-free merger in
which SFP stockholders would receive, for each share of SFP Common Stock, .344
of a share of UPC common stock. On October 27, 1994, .344 of a share of UPC
common stock (based on the closing price on that date) had a value of $16.73.
The transaction contemplated in the UPC Proposal is subject to ICC approval,
the termination of the BNI-SFP merger agreement, execution of a definitive
agreement and the approval of the Board of Directors and the stockholders of
both SFP and UPC. The UPC Proposal is also conditioned upon the satisfactory
completion of a due diligence review of SFP. UPC offered to facilitate an SFP
due diligence review of UPC.
The UPC Proposal stated that UPC is prepared to grant conditions to Southern
Pacific, BNI or other railroads, including access to points that would
otherwise change from two serving railroads to one, rights to handle service-
sensitive business moving between California, Chicago and the Midwest, and
access to the Kansas and Oklahoma grain markets. The UPC Proposal further
stated that UPC envisions that certain members of the SFP Board would be
invited to serve on UPC's Board. The UPC Proposal further stated that UPC was
prepared to immediately commence negotiation of a definitive merger agreement
containing mutually agreeable terms and conditions.
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The SFP Board met to consider the UPC Proposal on October 5 and October 6,
1994. At those meetings, counsel for SFP explained that SFP's directors did not
have the right to terminate the Original Merger Agreement in response to the
UPC Proposal but did have the right, to the extent required by their fiduciary
duties under applicable law if so advised by outside counsel, (i) to engage in
negotiations or provide any confidential information or data to UPC relating to
the UPC Proposal and (ii) to withdraw, modify or amend their recommendation
that SFP's stockholders approve the Original Merger Agreement and the BNI-SFP
merger.
Mr. Krebs reminded the SFP Board of his description at prior Board meetings
of two telephone calls he had had with Mr. Lewis earlier in the year. The
first, on June 7, 1994, occurred when Mr. Krebs returned Mr. Lewis' unsolicited
telephone call made on June 6. Mr. Lewis stated on June 7 that if SFP made its
deal with BNI, UPC would not oppose it and, in fact, would welcome it because
UPC liked good competitors. Mr. Lewis went on to say that UPC also would not
object if SFP entered into a transaction to acquire Kansas City Southern
Railway Company. The second telephone call was shortly after the BNI-SFP merger
agreement was announced on June 29, 1994. Mr. Krebs called Mr. Lewis as a
courtesy, and Mr. Lewis stated that he had seen the press release and that UPC
would study the matter.
After discussions at both meetings and consultation with its financial and
legal advisors, the SFP Board unanimously decided to reject the UPC Proposal
and reaffirm its recommendation to SFP's stockholders that they approve the
Original Merger Agreement and the BNI-SFP merger. In reaching its decision, the
SFP Board considered the following factors:
1. Likelihood of ICC Approval. The SFP Board concluded that it is unlikely
that a UPC-SFP combination would receive ICC approval. The SFP Board based its
conclusion in part on its own knowledge, and the view of management, that the
extensive market overlaps between the two railroad systems and the dominant
position of UPC would make such a combination anticompetitive. The SFP Board
also based its conclusion in part on advice of counsel that, given the
anticompetitive effects of a UPC-SFP combination, the ICC was unlikely to
approve such a combination absent concessions by UPC that would make the
transaction untenable and the ICC might well not approve it regardless of any
concessions made by UPC. The SFP Board noted that in the past it had, as part
of management's strategic reviews with the SFP Board, discussed the possibility
of a UPC-SFP combination, but had not pursued this idea because of the
improbability of obtaining ICC approval, given the adverse effect on
competition that such a combination would have.
2. Perception of UPC Proposal. The SFP Board perceived the UPC Proposal as
apparently designed to prevent the consummation of the BNI-SFP merger and the
creation of a strong competitor to UPC. The SFP Board based this perception on
its conclusion that ICC approval of a UPC-SFP combination is unlikely and on
the timing of the UPC Proposal. The SFP Board also took account of the
inconsistency between UPC's present position and Mr. Lewis' earlier statement
to Mr. Krebs that UPC would not oppose a BNI-SFP merger.
3. Opinion of Financial Advisor. Goldman Sachs advised the SFP Board that
under the circumstances described to the SFP Board by SFP's management and
counsel, Goldman Sachs reaffirmed its opinion with respect to the original
exchange ratio contemplated by the BNI-SFP merger. See the full text of the
opinion of Goldman Sachs dated the date of the Original Joint Proxy
Statement/Prospectus (attached as Appendix D to the Original Joint Proxy
Statement/Prospectus), which sets forth certain assumptions made by Goldman
Sachs, including the assumption that under the foregoing circumstances Goldman
Sachs, in analyzing the original exchange ratio, need not take into account the
consideration which might be received under the UPC Proposal.
4. Binding Agreement. The SFP Board noted that SFP has no right to terminate
the Original Merger Agreement and that it is important to avoid breaches of the
Original Merger Agreement, particularly in light of the SFP Board's belief that
consummation of the BNI-SFP merger is in the best interest of SFP's
stockholders because (1) the BNI-SFP merger has significant benefits for SFP
stockholders and (2) if the
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Original Merger Agreement is terminated and if the UPC Proposal cannot be
consummated, SFP would be left without a strategic combination which is
required to protect and enhance shareholder value.
The SFP Board also discussed the significance of Mr. Lewis' remarks to Mr.
Krebs regarding the possibility of UPC offering a $20 per share price and
establishing a voting trust. The SFP Board noted that Mr. Lewis' statements
were inconsistent with the UPC Proposal and UPC's press release, which was
issued after Mr. Lewis met with Mr. Krebs. However, the SFP Board decided,
after being advised by outside counsel that its fiduciary duties under
applicable law required such a step, that SFP should communicate to UPC that,
if UPC were to make a proposal at a fair price and with an adequate provision
for a voting trust that would substantially eliminate the regulatory risk for
SFP stockholders, the SFP Board would consider that proposal in light of its
fiduciary duties.
On October 6, 1994, this information, along with the SFP Board's decision to
reject the UPC Proposal, was sent to UPC in a letter from Mr. Krebs to Mr.
Lewis and in a press release issued by SFP. BNI was made aware of, and did not
object to, the contents of the letter and press release before they were sent
or issued.
On October 11, 1994, in a letter addressed to Mr. Krebs, UPC expressed its
dissatisfaction with the SFP Board's prompt rejection of the UPC Proposal. It
emphasized the possible benefits to be attained in accepting the UPC Proposal,
asked the SFP Board to consider UPC's analysis of ICC matters, and urged Mr.
Krebs, along with his advisors, to meet with UPC representatives. UPC concluded
its letter by stating that the proposed purchase price was considered by UPC to
be a "fair price" but that UPC would be prepared to receive information from
SFP that might justify a greater consideration. The SFP Board considered the
October 11 letter, and decided to reaffirm its prior position but requested UPC
to provide SFP with UPC's analysis of ICC matters.
On October 11, 1994, in a letter to Mr. Lewis, Mr. Krebs communicated (i) the
SFP Board's decision to reject the previously made proposal by UPC to acquire
SFP and to reaffirm its recommendation to SFP's stockholders that they approve
the Original Merger Agreement and the Merger contemplated thereby and (ii) the
SFP Board's request that UPC provide SFP with UPC's analysis of ICC matters.
On October 13, 1994, UPC announced that it would solicit proxies in
opposition to approval of the Original Merger Agreement.
On October 17, 1994, Mr. Lewis sent Mr. Krebs a fourteen page memorandum
prepared by UPC's Vice President of Strategic Planning (the "UPC Memorandum")
dated October 17, 1994, which Mr. Lewis described as a "summary analysis of the
case regarding our merger proposal that we would expect to present to the
Interstate Commerce Commission." The UPC Memorandum described alleged benefits
that would be created by a UPC-SFP merger, acknowledged that such a merger
would have anticompetitive effects, and proposed to deal with these effects
through certain conditions that UPC "might" accept. Mr. Krebs directed SFP's
management, lawyers and other advisors to study the UPC Memorandum in order to
advise the SFP Board whether the UPC Memorandum provided any basis for the SFP
Board to change its position with respect to a possible UPC-SFP merger.
At a meeting on October 20, 1994, the Board of Directors of BNI met to
consider whether any action should be taken with respect to the Original Merger
Agreement and the transactions contemplated thereby. The BNI Board received
presentations from its management and legal advisors concerning various recent
developments as well as a presentation from Lazard analyzing the possibility of
increasing the original exchange ratio. In connection with its presentation,
Lazard considered, among other things, the impact of the anticipated increase
in operating income of the merged entity set forth in the application filed by
BNI and SFP with the ICC in connection with the Merger (the "ICC Application"),
as well as the fact that the proposed merger with SFP would be accounted for
under the "pooling of interests" method of accounting rather than, as had been
expected on June 29, 1994, the "purchase" method of accounting.
On October 24, 1994, Mr. Grinstein spoke with Mr. Krebs concerning the
possibility of increasing the exchange ratio included in the Original Merger
Agreement.
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Also on October 24, 1994, UPC sent Mr. Krebs another set of materials (the
"UPC Panel Statement"), in which five experts retained by UPC offered their
views in support of UPC's position with respect to various issues regarding ICC
approval of a UPC-SFP combination.
The SFP Board met on October 25, 1994. At the meeting, Mr. Krebs advised the
SFP Board of his telephone call with Mr. Grinstein the previous day, and
Goldman Sachs provided the SFP Board with an analysis of the effects of an
increase in the original exchange ratio to various levels, including an
increase to 0.34. The SFP Board discussed the possibility of entering into an
amended merger agreement with BNI.
The SFP Board also received at the meeting oral and written presentations as
to whether the UPC Memorandum or the UPC Panel Statement warranted a change in
the SFP Board's position with respect to a possible UPC-SFP merger. These
presentations examined the likelihood of ICC approval of a BNI-SFP merger and a
UPC-SFP merger. The Board heard from SFP's management, its lawyers and Mr. Paul
Lamboley, a former ICC Commissioner, and was provided with a written statement
prepared by Mr. Barry C. Harris, a Principal and Senior Vice-President of
Economists Incorporated, a Washington, D.C.-based consulting firm. Mr. Harris
served as Deputy Assistant Attorney General and Chief Economist in the
Antitrust Division of the United States Department of Justice ("DOJ") from
October 1992 until mid-January 1993 and testified on behalf of the DOJ against
the proposed merger between SFP and Southern Pacific Company ("Southern
Pacific"). Both Mr. Lamboley and Mr. Harris have been retained by SFP to serve
as expert advisors to the SFP Board. In particular, Mr. Lamboley has been
retained by SFP to advise and assist it in connection with the pending Delaware
litigation arising out of the proposed BNI-SFP Merger and related matters
concerning the likelihood of ICC approval of a UPC-SFP combination.
Mr. Lamboley provided the SFP Board with an overview on merger cases since
the late 1970's before the ICC, outlined the statutory criteria and analytical
approach the ICC typically uses in reviewing proposed railroad mergers and
described how the ICC would most likely review a UPC-SFP merger proposal,
focusing on competitive impact. He opined that it is unlikely that the ICC
would approve the UPC-SFP merger, as proposed, absent imposition of substantial
conditions to ameliorate the significant competitive concerns which conditions
could make the transaction untenable. He noted, however, that the ICC will
generally not use its conditioning authority to substantially restructure a
transaction beyond the scope proposed. Because a detailed analysis of the
corridors and commodities would be needed to determine the competitive impact
and the level of conditions necessary, the proceedings would be protracted--
likely to require the full 31-month statutory period--with the outcome
uncertain. (The SFP Board was aware that the ICC has adopted a schedule for the
BNI-SFP application that would result in a final decision in the first quarter
of 1996.) Mr. Lamboley characterized the UPC-SFP merger proposal as being
largely parallel, with potentially significant anticompetitive effects,
observing that the ICC had rejected a parallel merger (SFP-Southern Pacific)
involving similar markets. Mr. Lamboley opined that the DOJ, as it did in the
SFP-Southern Pacific case, would likely actively oppose the UPC-SFP combination
because of its substantial competitive impact and, although not binding,
antitrust principles would provide guidance for ICC evaluation of competition.
Mr. Lamboley stated that, in his view, the benefits claimed by UPC for the
proposed combination were on balance unlikely to overcome the combination's
competitive effects, distinguishing private benefits from public benefits. By
way of contrast, Mr. Lamboley stated that in his view the BNI-SFP merger could
provide significant public benefits and thus was more likely to receive ICC
approval without imposition of substantial conditions.
In his written statement, Mr. Harris opined, based on his professional
knowledge and experience and his review of Mr. Lewis' October 5, 1994 letter
proposal, the UPC Memorandum and other publicly available information, that the
DOJ would subject a UPC-SFP combination to intense scrutiny and very likely
would vigorously oppose such a combination. Mr. Harris noted that, while a
complete DOJ analysis would include a review of confidential traffic data, the
DOJ likely would have serious concerns about competitive problems, including
diminished competition in the important Midwest-California corridor, the
Midwest-Texas corridor and U.S.-Mexico traffic, likely to result from such a
combination. Mr. Harris also opined that the DOJ likely would conclude that the
conditions that UPC indicated in the UPC Memorandum that UPC might accept
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<PAGE>
would be inadequate to address the competitive problems raised by a UPC-SFP
combination. In addition, Mr. Harris stated his view that, from an economic
perspective, there were serious questions regarding the benefits that UPC
asserted in the UPC Memorandum would result from such a combination and that
the DOJ was unlikely to be persuaded by those asserted benefits. Mr. Harris did
not discuss the likelihood of ICC approval of a BNI-SFP merger. Except as
stated in this paragraph and the immediately preceding paragraph, neither Mr.
Lamboley nor Mr. Harris made any assumptions or qualifications in providing
their advice to the SFP Board.
The SFP Board questioned SFP's management, its lawyers and Mr. Lamboley about
their presentations and discussed the issues raised, but took no action with
respect to these issues at the October 25 meeting.
At a meeting on October 26, 1994, the Board of Directors of BNI, by unanimous
vote, determined that it would be fair to and in the best interests of BNI and
its stockholders to increase the exchange ratio from 0.27 shares of BNI Common
Stock per share of SFP Common Stock to 0.34 shares of BNI Common Stock per
share of SFP Common Stock and approved the Amendment to the Original Merger
Agreement implementing such increase. In reaching this determination, the BNI
Board of Directors considered, among other things, reports from BNI management
and BNI's legal and financial advisors updating the Board on recent
developments; the fact that the Merger would be accounted for under the
"pooling of interests" method of accounting rather than, as had been expected
on June 29, 1994, the "purchase" method of accounting; the financial data,
including the anticipated increase in operating income, set forth in the ICC
Application; and a presentation by Lazard, BNI's financial advisor, as to the
proposed increase in the exchange ratio and the Merger. At that meeting Lazard
rendered to the BNI Board of Directors its oral opinion that, based upon and
subject to various considerations and such other factors as it deemed relevant,
on October 26, 1994, the Exchange Ratio was fair to the holders of BNI Common
Stock from a financial point of view. Lazard has also delivered its written
opinion confirming, as of the date of this Supplemental Joint Proxy
Statement/Prospectus, its oral opinion of October 26, 1994.
In connection with its oral opinion delivered to the BNI Board on October 26,
1994 as well as its subsequent written opinion dated the date of this
Supplemental Joint Proxy Statement/Prospectus, Lazard performed analyses
substantially similar to those described in the Original Joint Proxy
Statement/Prospectus with respect to Lazard's opinion dated June 29, 1994 and,
among other things, updated the pro forma merger consequences analysis, based
on the estimate of benefits included in the ICC Application, which estimate was
developed after the delivery by Lazard of its previous opinions. After taking
into account the potential cost savings and revenue enhancements anticipated to
be realized following the Merger which are included in the ICC Application,
using the pooling of interests method of accounting and without taking into
account certain post-merger non-recurring expenses, Lazard observed that the
Merger would result in the initial accretion in earnings per share of
approximately 3.2% in the first year after the Merger is consummated (which was
assumed to be 1996) from BNI's stockholders' point of view. Lazard further
observed that the Merger would provide earnings per share accretion of
approximately 13.9% and 19.0% in 1997 and 1998, respectively, from BNI's
stockholders' point of view, after taking into account the potential cost
savings and revenue enhancements anticipated to be realized during such years
as included in the ICC Application, without taking into account certain post-
merger non-recurring expenses. In addition, Lazard recalculated the multiples
utilized in the comparable transaction analysis using the Exchange Ratio and
noted that SFP acquisition multiples were 22.3x historical net earnings, 7.4x
historical EBITDA and 11.1x historical EBIT, in each case implied by the
closing price of BNI Common Stock on October 19, 1994. Lazard noted that these
multiples, if calculated based on the closing price of BNI Common Stock on
October 26, 1994, would not change materially.
Lazard also analyzed the hypothetical unaffected trading value of SFP Common
Stock as if the Merger and the UPC Proposal had not been announced. This
analysis was based on the Institutional Brokers Estimate System's estimated
consensus 1994 and 1995 earnings per share for SFP and a price to earnings
ratio range Lazard considered appropriate after taking into consideration such
ratios of comparable publicly traded
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Class I railroad holding companies. This analysis indicated a hypothetical
unaffected trading value range for the SFP Common Stock of approximately
$11.00 to $13.00 per share. Using the midpoint of this range, Lazard
calculated the premium to be offered to holders of SFP Common Stock of
approximately 38.5% based upon the closing price of BNI Common Stock on
October 19, 1994 and utilizing the Exchange Ratio. Lazard noted that this
premium, if calculated based on the closing price of BNI Common Stock on
October 26, 1994, would be 42.7%.
In addition, Lazard observed that the credit statistics of the combined
company under the pooling of interests method of accounting would remain
largely unchanged compared with those of BNI on a stand-alone basis. Lazard
also noted that by applying the Exchange Ratio, BNI stockholders would
receive, on a projected pro forma fully diluted basis, approximately 60.3% of
the ownership interest in the combined company.
THE FULL TEXT OF THE WRITTEN OPINION OF LAZARD DATED THE DATE OF THIS
SUPPLEMENTAL JOINT PROXY STATEMENT/PROSPECTUS, WHICH SETS FORTH ASSUMPTIONS
MADE, MATTERS CONSIDERED AND THE REVIEW UNDERTAKEN WITH REGARD TO SUCH
OPINION, IS ATTACHED AS APPENDIX B TO THIS SUPPLEMENTAL JOINT PROXY
STATEMENT/PROSPECTUS. BNI STOCKHOLDERS ARE URGED TO, AND SHOULD, READ THE
OPINION CAREFULLY AND IN ITS ENTIRETY. LAZARD'S OPINION IS DIRECTED ONLY TO
THE EXCHANGE RATIO AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER
OF BNI AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE SPECIAL MEETING OF
STOCKHOLDERS OF BNI. THE SUMMARY OF THE OPINION OF LAZARD SET FORTH IN THIS
SUPPLEMENTAL JOINT PROXY STATEMENT/PROSPECTUS SHOULD BE READ IN CONJUNCTION
WITH THE SUMMARY OF LAZARD'S OPINION DATED JUNE 29, 1994 SET FORTH IN THE
ORIGINAL JOINT PROXY STATEMENT/PROSPECTUS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF ITS WRITTEN OPINION DATED THE DATE OF THIS
SUPPLEMENTAL JOINT PROXY STATEMENT/PROSPECTUS.
In arriving at its oral and written opinions dated October 26, 1994 and the
date of this Supplemental Joint Proxy Statement/Prospectus, and in discussing
its October 26, 1994 opinion with BNI's Board of Directors, Lazard performed
various financial analyses, portions of which are summarized above. The
summary set forth above does not purport to be a complete description of
Lazard's analyses. Lazard believes that its analyses must be considered as a
whole and that selecting portions of its analyses, without considering all
analyses, could create an incomplete view of the process underlying the
opinion. In performing its analyses, Lazard made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of BNI or SFP. The
analyses performed by Lazard are not necessarily indicative of actual values
or actual future results, which may be significantly more or less favorable
than suggested by such analyses. Additionally, analyses relating to the values
of businesses do not purport to be appraisals or to reflect actual market
valuations or trading ranges, which may vary significantly from amounts set
forth above.
After the October 26 BNI Board of Directors meeting, Mr. Grinstein called
Mr. Krebs and advised him that the BNI Board was willing to amend the Original
Merger Agreement to provide for an exchange ratio of 0.34.
On October 26, after the BNI Board meeting, the SFP Board held a meeting.
Mr. Krebs advised the SFP Board of Mr. Grinstein's telephone call earlier in
the day, and the SFP Board took up the question of whether to enter into an
amended Merger Agreement on the terms proposed by BNI. The SFP Board decided
to do so for a number of reasons, some of which were discussed at the October
26 meeting and some of which were discussed at the October 25 meeting. The SFP
Board noted that, based on closing stock prices on October 25, 1994, the
market price of 0.34 of a BNI common share was slightly more than the market
price of 0.344 (the exchange ratio set forth in the UPC Proposal) of a UPC
common share.
The SFP Board also noted that the UPC Proposal was not legally binding
because it was subject to a due diligence investigation and the negotiation
and execution of a merger agreement. Thus, SFP's
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<PAGE>
stockholders could have no assurance that UPC would in fact offer .344 shares
of UPC common stock if the BNI transaction were rejected and the Original
Merger Agreement were terminated. The SFP Board considered the risk of UPC not
proceeding with its proposal if the Original Merger Agreement with BNI were
terminated to be substantial because of the SFP Board's perception that the UPC
Proposal was apparently designed to prevent the consummation of the BNI-SFP
merger and the creation of a strong competitor to UPC. If the Original Merger
Agreement were terminated and no agreement with UPC were reached, the price of
SFP Common Stock might well drop significantly and SFP would be left without a
strategic combination which is required to protect and enhance stockholder
value.
The SFP Board also took account of the substantial long-term benefits that
might accrue to SFP's stockholders from a merger. The SFP Board concluded, in
part on the basis of the presentations of SFP's management, its lawyers and Mr.
Lamboley, that the long-term benefits from a BNI-SFP merger were likely to be
realized because that merger was likely to receive ICC approval while any long-
term benefits from a UPC-SFP merger were uncertain and unlikely to be realized
because the UPC Proposal, as further described in the UPC Memorandum, was
unlikely to receive ICC approval. In reaching its conclusions about the
likelihood of ICC approval of either transaction, the SFP Board considered the
following factors:
BNI-SFP MERGER
--------------
1. Benefits. A BNI-SFP combination would create substantial benefits for
shippers and the public, as well as for SFP's stockholders. The combination
would create an integrated rail network capable of reaching most of the key
domestic and export gateways in the western United States, thereby giving
shippers substantially increased opportunities for efficient single-line
service to numerous important markets. The combination would also introduce new
competition in service to shippers needing to reach multiple points (including
all major West Coast and many Gulf Coast ports). Reduced operating and overhead
costs of a consolidated BNI-SFP would result in more efficient service. Given
the predominately end-to-end nature of the merger (i.e., very little overlap),
these benefits would be created without significant adverse effects on
competition.
2. Risks. Although the SFP Board believes that it is likely that the ICC will
approve a BNI-SFP merger, there is a risk that the ICC might find that the
benefits to the public and the applicants from a BNI-SFP merger were outweighed
by the potential harm to the public produced by such a merger, particularly any
reduction in rail competition, harm to essential rail services or other factors
deemed detrimental to the public interest. Opponents of the transaction may
raise a number of challenges to the proposal, including allegations of
diminution in competition, claims of harm to essential rail services,
criticisms of the scale of the benefits claimed by SFP and BNI, complaints
about the fairness of the exchange ratio to the stockholders of the two
companies, concerns about the effect of the transaction on affected employees
of the two companies and similar points. For example, there are some limited
areas where the BNI and SFP systems do overlap--such as in Amarillo and
Lubbock, Texas--and it is probable that objections will be raised during the
ICC proceeding about the reduction in rail competition in those areas. SFP and
BNI have advised the ICC of their willingness to negotiate ameliorative
arrangements to address any such reductions in competition.
UPC-SFP MERGER
--------------
1. Adverse Effect on Competition. Because the UPC and SFP rail systems are
substantially parallel and SFP and UPC are currently major competitors on many
routes, a UPC-SFP combination would have a substantial anticompetitive effect.
It would significantly reduce competition by combining the dominant carrier in
the West (UPC) with its major competitor (SFP) in the very important Chicago-
California and Kansas City-California routes and leave the combined UPC-SFP as
an even more dominant competitor on those routes. In light of the coverage of
both SFP and UPC in Kansas, and their common connections with major regional
carriers, a UPC-SFP combination would present significant competitive impacts
on Kansas
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grain shippers. Wheat and feed grains moving from Southern Colorado to either
California or the Gulf of Mexico would present another competitive issue. There
would also be a competitive issue raised by a reduction in the number of
carriers serving the ports of Houston and Los Angeles/Long Beach. A UPC-SFP
merger would also eliminate competition between SFP service to Mexico through
El Paso and UPC service to Mexico through Laredo; UPC's overwhelming post-
merger share of all U.S. traffic to Mexico would cause competitive concerns.
A UPC-SFP merger would create major competitive problems with respect to
specific commodities as well. Precise market share data by corridors are not
readily available, but the combined share of western railroad movements handled
by UPC and SFP in major categories would be substantial and more than 70% in
the important Midwest-Southern California intermodal domestic flow. On a
combined basis, UPC and SFP would originate more than 70% of automotive
movements in the West. Eliminating competition between UPC and SFP would end a
fierce rivalry. In 1990, for example, UPC succeeded in underbidding SFP on a
contract (valued in the tens of millions of dollars) to carry all Ford traffic
from Kansas City to California.
2. Inadequate Conditions. Only three out of the fourteen pages in the UPC
Memorandum discussed the competition issues that a UPC-SFP combination would
raise. The UPC Memorandum proposed to deal with these issues with certain
conditions that UPC "might" accept. SFP's management, its lawyers and Mr.
Lamboley noted that UPC had not identified and proposed specific solutions for
all of the significant competitive problems that a UPC-SFP merger would create.
SFP's management, its lawyers and Mr. Lamboley concluded that, even where UPC
had suggested conditions, they were unlikely to be sufficient. For example, as
to the most severe competitive problem--reduced competition among railroads
serving the routes between California and the Upper Midwest and a combined UPC-
SFP's dominant position on those routes--UPC proposed only that it might accept
a grant to Southern Pacific, the other carrier that currently does compete in
the California-Upper Midwest corridor, of trackage rights or other conditions.
SFP's management, its lawyers and Mr. Lamboley doubted the value of conditions
that would only benefit a carrier already serving the routes in question,
concluding that such conditions were unlikely to be sufficient to compensate
for a substantial diminution in competition on one of the nation's most
important railroad routes.
SFP's management, its lawyers and Mr. Lamboley also noted that UPC had made
no commitment to accept the conditions it had proposed. They also advised the
SFP Board that there is no precedent for the extent of conditions that would
address the various competitive issues and level of concentration that would
arise in a UPC-SFP combination and that, even on the dubious assumption that
complex conditions could be crafted to solve all the competitive problems in
such a combination, such conditions would not necessarily lead to approval
because the ICC might be concerned about whether such conditions would work and
whether the agency could adequately supervise them. Such conditions would also
be economically costly, potentially depressing the value of the UPC stock that
SFP's stockholders would receive in a merger. SFP's management, its lawyers and
Mr. Lamboley also advised the SFP Board that opponents of the transaction might
argue that the history of conditions demonstrates that such conditions have
often been found ineffective in providing long-term competitive alternatives.
The conditions granted the Milwaukee Road in the BNI northern lines case, the
trackage rights granted Southern Pacific between Kansas City and St. Louis in
MP-UPC, and the long-term validity of the so-called DT&I conditions granted in
many early mergers have all been criticized as ineffective.
SFP's management, its lawyers and Mr. Lamboley noted that the authors of the
UPC Panel Statement assumed that UPC would agree to sufficient conditions to
permit a UPC-SFP merger to be approved and that it was unwise for SFP or its
stockholders to make such an assumption. They also noted that, while some
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of the authors of the UPC Panel Statement stated that UPC could make a "strong"
or "credible" case for ICC approval of a UPC-SFP merger, none of them, despite
their retention by UPC, stated that such approval was likely.
3. Benefits. SFP's management, its lawyers and Mr. Lamboley concluded that
the service benefits described in the UPC Memorandum were unlikely to be
persuasive to the ICC because many of them would be achievable only at the
expense of a substantial reduction in competition. SFP's management, its
lawyers and Mr. Lamboley also concluded that many of the benefits claimed by
UPC were overstated. For example, what UPC describes as new single-line service
is often, in reality, nothing more than a different route between an origin and
a destination that UPC already serves. Many of the service improvements claimed
by UPC appear based on a misunderstanding of SFP's current operations. For
intermodal traffic, SFP already has frequent departures between Chicago and
California, approximately every four hours--the same frequency UPC proposes;
SFP already offers service between Chicago and Northern California every six
hours; and with respect to automotive traffic, SFP already offers solid unit
trains to California.
4. Timing. SFP's management, its lawyers and Mr. Lamboley indicated that a
UPC-SFP merger application would be highly contested and would be likely to
require the full 31 months permitted by statute to resolve. This would result
in a schedule that was substantially longer than the ICC schedule for the BNI-
SFP application, which calls for a ruling in the first quarter of 1996. Because
of this timing difference, SFP and its stockholders would be faced with a
significantly longer period of uncertainty while ICC approval was being sought
under an agreement with UPC than they would under the Original Merger
Agreement.
At the October 26 meeting, Goldman Sachs gave the SFP Board an oral opinion
to the effect that, as of October 26, based on various considerations and
assumptions, including the circumstances described to the SFP Board by SFP's
management, its lawyers and Mr. Lamboley, the Exchange Ratio was fair to SFP's
stockholders. That opinion has been confirmed in writing and updated to the
date hereof. See the full text of the opinion of Goldman Sachs dated the date
hereof (attached hereto as Appendix C), which sets forth certain assumptions
made by Goldman Sachs, including the assumption that under the foregoing
circumstances Goldman Sachs, in analyzing the Exchange Ratio, need not take
into account the consideration which might be received under the UPC Proposal.
In connection with this opinion, Goldman Sachs relied on updated financial
projections prepared by the management of SFP and updated estimates made by
senior managements of SFP and BNI of the synergies expected to be realized from
the Merger of $336 million in the first year after the Merger is consummated
(which was assumed to be 1996), $476 million in 1997 and $532 million in 1998.
Certain assumptions underlying these synergies are set forth under the caption
"Other Matters--Additional Financial Considerations" in the Original Joint
Proxy Statement/Prospectus. Such revised pro forma merger analysis showed that
the Merger, after taking into account the synergies expected to be realized
from the Merger, would result in the initial accretion of the EPS of BNI by
approximately 4.5% in the first year after the Merger is consummated and that
thereafter the Merger would provide EPS accretion to BNI stockholders of
approximately 14.6% and 17.3% in 1997 and 1998, respectively. Furthermore,
Goldman Sachs' revised analysis showed that from the point of view of SFP
stockholders the Merger would provide EPS accretion of approximately 76.0% in
the first year after the Merger is consummated (which was assumed to be 1996)
and that thereafter the Merger would provide EPS accretion to SFP stockholders
of approximately 70.9% and 65.4% in 1997 and 1998, respectively. In addition,
this analysis showed that SFP stockholders would receive an additional $0.38 in
dividends on a pro forma per share basis.
The SFP Board voted unanimously to approve the amended Merger Agreement. The
Amendment to the Original Merger Agreement was executed and delivered promptly
by BNI and SFP after such approval. The SFP Board also authorized Mr. Krebs to
communicate to UPC that the UPC Memorandum and the UPC Panel Statement did not
change the SFP Board's views. Mr. Krebs did so promptly.
14
<PAGE>
CERTAIN PENDING LITIGATION
On June 30, 1994, shortly after announcement of the proposed BNI-SFP merger,
two purported stockholder class action suits were filed in the Court of
Chancery of the State of Delaware (Miller v. Santa Fe Pacific Corporation, C.A.
No. 13587; Cosentino v. Santa Fe Pacific Corporation, C.A. No. 13588). On July
1, 1994, two additional purported stockholder class action suits were filed in
the Court of Chancery of the State of Delaware (Fielding v. Santa Fe Pacific
Corporation, C.A. No. 13591; Wadsworth v. Santa Fe Pacific Corporation, C.A.
No. 13597).
The actions name as defendants SFP, the individual members of the SFP Board
of Directors and BNI. In general, the actions variously allege that SFP's
directors breached their fiduciary duties to the stockholders by agreeing to
the proposed merger for allegedly "grossly inadequate" consideration in light
of recent operating results of SFP, recent trading prices of SFP's common stock
and other alleged factors, by allegedly failing to take all necessary steps to
ensure that stockholders will receive the maximum value realizable for their
shares (including allegedly failing to actively pursue the acquisition of SFP
by other companies or conducting an adequate "market check") and by allegedly
failing to disclose to stockholders the full extent of the future earnings
potential of SFP, as well as the current value of its assets. The Miller and
Fielding cases further allege that the proposed BNI-SFP merger is unfairly
timed and structured and, if consummated, would allegedly unfairly deprive the
stockholders of standing to pursue certain pending stockholder derivative
litigation. Plaintiffs also have alleged that BNI is responsible for aiding and
abetting the alleged breach of fiduciary duty committed by the SFP Board. The
actions seek certification of a class action on behalf of SFP's stockholders.
In addition, the actions seek injunctive relief against consummation of the
merger and, in the event that the merger is consummated, the rescission of the
merger, an award of compensatory or rescissory damages and other damages,
including court costs and attorneys' fees, an accounting by defendants of all
profits realized by them as a result of the merger and various other forms of
relief.
On October 6, 1994, shortly after UPC issued a press release in which it
announced the UPC Proposal, plaintiffs in the four lawsuits described above
filed in the Court of Chancery of the State of Delaware a Consolidated Amended
Complaint. (Miller v. Santa Fe Pacific Corporation, C.A. No. 13587). In their
Consolidated Amended Complaint, plaintiffs repeat the allegations contained in
their earlier lawsuits and further allege that, in light of the UPC Proposal,
SFP's directors have breached their fiduciary duties by failing to fully inform
themselves about and to adequately explore available alternatives to the merger
with BNI, including the alternative of a merger transaction with UPC, and by
failing to fully inform themselves about the value of SFP. The Consolidated
Amended Complaint seeks the same relief sought in plaintiffs' earlier lawsuits
and, in addition, requests that SFP's directors be ordered to explore
alternative transactions and to negotiate in good faith with all interested
persons, including UPC.
Also on October 6, 1994, UPC filed in the Court of Chancery of the State of
Delaware a lawsuit against SFP, SFP's directors and BNI (Union Pacific
Corporation v. Santa Fe Pacific Corporation, C.A. No. 13778). In its Complaint,
UPC alleges that SFP's management purportedly rejected the UPC Proposal "out-
of-hand" without regard to the facts of the UPC Proposal, and that SFP's
directors have breached their fiduciary duties by purportedly refusing to
negotiate with UPC regarding the UPC Proposal, by refusing to terminate the
Original Merger Agreement and by failing to include in the Original Merger
Agreement a provision allowing SFP to terminate the Original Merger Agreement
in order to enter an agreement with UPC. UPC seeks injunctive relief mandating
SFP to negotiate with UPC regarding the UPC Proposal, a declaration that UPC
has not tortiously interfered with defendants' contractual or other legal
rights, an injunction against defendants from bringing or maintaining any
action against UPC alleging that UPC has tortiously interfered with defendants'
contractual or other legal rights, a declaration that the Original Merger
Agreement with BNI permits SFP to terminate the Original Merger Agreement in
order to accept the UPC Proposal or, in the alternative, that the Original
Merger Agreement with BNI is invalid and unenforceable for failing to include
such a provision, and an award of UPC's costs in bringing its lawsuit,
including reasonable attorneys' fees.
15
<PAGE>
Also on October 6, 1994, five additional purported stockholder class action
suits relating to SFP's proposed participation in the merger with BNI were
filed in the Court of Chancery of the State of Delaware (Weiss v. Santa Fe
Pacific Corporation, C.A. No. 13779; Lifshitz v. Krebs, C.A. No 13780; Stein v.
Santa Fe Pacific Corporation, C.A. No. 13782; Lewis v. Santa Fe Pacific
Corporation, C.A. No. 13783; Abramson v. Lindig, C.A. No. 13784). On October 7,
1994, three more purported stockholder class action suits relating to SFP's
proposed participation in the merger with BNI were filed in the Court of
Chancery of the State of Delaware (Graulich v. Santa Fe Pacific Corporation,
C.A. No. 13786; Anderson v. Santa Fe Pacific Corporation, C.A. No. 13787; Green
v. Santa Fe Pacific Corporation, C.A. No. 13788). All of these lawsuits name as
defendants SFP and the individual members of the SFP Board of Directors; the
Lifshitz case further names BNI as a defendant. In general, these actions
variously allege that, in light of SFP's recent operating results and the UPC
merger proposal, SFP's directors have breached their fiduciary duties to
stockholders by purportedly not taking the necessary steps to ensure that SFP's
stockholders will receive "maximum value" for their shares of SFP stock,
including purportedly refusing to negotiate with UPC or to "seriously consider"
the UPC Proposal and failing to announce any active auction or open bidding
procedures. The actions generally seek relief that is materially identical to
the relief sought in the Miller case, and in addition seek entry of an order
requiring SFP's directors to immediately undertake an evaluation of SFP's worth
as a merger/acquisition candidate and to establish a process designed to obtain
the highest possible price for SFP, including taking steps to "effectively
expose" SFP to the marketplace in an effort to create an "active auction" in
SFP. The Weiss case further seeks entry of an order enjoining SFP's directors
from implementing any poison pill or other device designed to thwart UPC's
merger proposal or any other person's proposal to acquire SFP.
The Anderson lawsuit was subsequently withdrawn. On October 14, 1994, the
Chancery Court entered an order consolidating the remaining eleven purported
stockholder class action suits under the heading In Re Santa Fe Pacific
Corporation Shareholder Litigation, C.A. No. 13587.
Also on October 14, 1994, plaintiffs in the consolidated case filed a
Consolidated and Amended Complaint, which supersedes the previously filed
stockholder complaints. The Consolidated and Amended Complaint generally
repeats the allegations of, and requests the same relief as, the plaintiffs'
earlier complaints and, in addition, alleges that SFP's directors have breached
their fiduciary duties by approving and recommending to SFP stockholders the
BNI-SFP merger, by failing to fully inform themselves about, or to provide
information to, possible alternative merger candidates such as UPC, and by
issuing the Original Joint Proxy Statement/Prospectus, which purportedly fails
to disclose all material information relevant to SFP stockholders'
consideration of the proposed BNI-SFP merger, including failure to disclose
that SFP's directors purportedly have an implied right to terminate the
Original Merger Agreement as a result of the allegedly superior UPC Proposal,
failure to disclose the facts considered by SFP's directors in allegedly
determining that the UPC Proposal does not represent a fair price, failure to
disclose sufficient facts relating to, and the relative risks of obtaining, ICC
approval of a BNI-SFP merger and a UPC-SFP merger to enable SFP stockholders to
weigh and compare the likelihood of obtaining ICC approval of those
transactions, failure to disclose the substance of negotiations in late June
1994 between BNI and SFP leading to the Original Merger Agreement, failure to
disclose advice provided to SFP's directors regarding the background of
negotiations between BNI and SFP that had occurred since 1993 and the
significance of that advice to the directors' approval of the Original Merger
Agreement, failure to disclose facts regarding the SFP directors' consideration
of a possible combination transaction with Kansas City Southern Industries,
Inc. ("KCSI"), including the anticipated terms and potential value and benefits
to SFP of such a transaction and the reasons why SFP concluded that the BNI
transaction was superior and withdrew its bid submitted to KCSI in late June
1994, and failure to disclose that SFP did not provide any confidential
information to UPC in response to an October 11, 1994 letter from Drew Lewis,
UPC's Chairman and CEO, to Mr. Krebs. The Consolidated and Amended Complaint
seeks, in addition to the relief requested in the prior stockholder complaints,
an order requiring SFP to provide access to information concerning SFP or the
Merger to any bona fide bidder, including UPC.
16
<PAGE>
On October 18, 1994, the Chancery Court entered an order denying two motions,
one filed by UPC and one filed by the stockholder plaintiffs seeking the
establishment of an expedited schedule that would have included a preliminary
injunction hearing prior to the scheduled November 18, 1994 meeting of SFP
stockholders. The Chancery Court concluded that an expedited schedule was
unnecessary because, if plaintiffs prevailed on their claims, it could
subsequently enter appropriate relief after SFP stockholder approval but before
consummation of the Merger.
On October 19, 1994, UPC filed an Amended and Supplemental Complaint. In
addition to repeating the allegations and requested relief of UPC's earlier
Complaint, the Amended and Supplemental Complaint adds James A. Shattuck as an
additional plaintiff, alleges that SFP has made purportedly false and
misleading statements in the Original Joint Proxy Statement/Prospectus and
elsewhere regarding the UPC Proposal and the BNI-SFP merger, including
statements denying that SFP's directors have the purported right to terminate
the Original Merger Agreement in order to enter into a merger agreement with
UPC based upon the UPC Proposal and denying that the Original Merger Agreement
is allegedly void for failing to include such a right, statements failing to
disclose the purportedly preclusive effect of the Original Merger Agreement on
the SFP directors' consideration of other combination proposals, including the
UPC Proposal, statements allegedly suggesting that the UPC Proposal does not
represent a fair price, and statements allegedly misrepresenting UPC's
objectives in proposing a UPC-SFP merger and the likelihood of obtaining ICC
approval of such a merger. The Amended and Supplemental Complaint seeks, in
addition to the relief requested in UPC's original Complaint, further
declaratory and injunctive relief consisting of a declaration that the Original
Joint Proxy Statement/Prospectus is false and misleading, an injunction
preventing SFP from making any further allegedly materially false and
misleading statements regarding the UPC Proposal or the BNI-SFP merger and an
injunction against the November 18, 1994 SFP stockholder meeting.
Defendants believe that all of these lawsuits are meritless and intend to
oppose them vigorously.
ADDITIONAL MATTERS RELATING TO ICC APPROVAL
Although each of SFP and BNI believes that it is likely that the ICC will
approve the Merger, there can be no assurance that it will do so. For a
description of the objections that may be made to ICC approval of the Merger,
see "Recent Developments."
17
<PAGE>
UNAUDITED SELECTED PRO FORMA FINANCIAL DATA
The following unaudited selected pro forma financial data give effect to the
exchange of 0.34 shares of BNI Common Stock for each share of SFP Common Stock
pursuant to the Merger Agreement, with the Merger accounted for under the
pooling of interests method, and are identical to the unaudited selected pro
forma financial data set forth in the Original Joint Proxy Statement/Prospectus
except for changes relating to the increased exchange ratio. The unaudited pro
forma balance sheet data as of June 30, 1994 give effect to the Merger as if it
had occurred on that date, and the unaudited pro forma income statement data
give effect to the Merger as if it had occurred on January 1, 1991. The
unaudited selected pro forma financial data set forth below do not reflect any
potential increases in operating income which may arise from the Merger or
adjustments to conform the accounting practices of BNI and SFP and should be
read in conjunction with the respective audited and unaudited consolidated
historical financial statements of BNI and SFP, including the respective notes
thereto, which are incorporated by reference in this Supplemental Joint Proxy
Statement/Prospectus and the unaudited pro forma combined financial statements,
including the notes thereto, appearing elsewhere in this Supplemental Joint
Proxy Statement/Prospectus. See "Incorporation of Certain Documents by
Reference" and "Unaudited Pro Forma Combined Financial Statements." The
unaudited selected pro forma financial data are prepared for illustrative
purposes only and are not necessarily indicative of the financial position or
results of operations that might have occurred had the Merger actually taken
place on the dates indicated, or of future results of operations or financial
position of the combined company.
<TABLE>
<CAPTION>
AT OR FOR SIX AT OR FOR
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
-------------- --------------------
1994 1993 1993 1992 1991
------- ------ ------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
COMBINED PRO FORMA BASIS
INCOME STATEMENT DATA
Revenues................................ $ 3,692 $3,504 $7,108 $6,882 $6,713
Income (loss) from continuing opera-
tions.................................. 272 289 473 320 (244)
BALANCE SHEET DATA
Total assets............................ $12,607 (a) (a) (a) (a)
Total debt, including current portion... 3,039 (a) (a) (a) (a)
Stockholders' equity.................... 3,156 (a) (a) (a) (a)
</TABLE>
- --------
(a)Not required.
18
<PAGE>
UNAUDITED COMPARATIVE PER SHARE DATA
The following table sets forth for BNI Common Stock and SFP Common Stock
certain historical combined pro forma and pro forma equivalent per share data
for the six months ended June 30, 1994 and 1993 and for each of the three years
ended December 31, 1993. The data set forth in the following table are
identical to the corresponding data set forth in the Original Joint Proxy
Statement/Prospectus except for changes relating to the increased exchange
ratio. The information presented herein should be read in conjunction with the
unaudited selected pro forma financial data appearing elsewhere in this
Supplemental Joint Proxy Statement/Prospectus and the selected historical
financial data included in the Original Joint Proxy Statement/Prospectus. See
"Unaudited Selected Pro Forma Financial Data." See also "Summary--Selected
Historical Financial Data" in the Original Joint Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
AT OR FOR SIX AT OR FOR
MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------- ----------------------
1994 1993 1993 1992 1991
------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
BNI COMMON STOCK
Income (loss) from continuing
operations per share:
Historical.......................... $ 1.75 $ 1.60 $ 3.06 $ 3.35 $ (3.96)
Combined pro forma (a).............. 1.69 1.82 2.94 2.09 (1.77)
Book value per share:
Historical.......................... 18.89 (b) 17.73 15.61 13.64
Combined pro forma.................. 18.42 (b) 18.51 (b) (b)
Cash dividends per share:
Historical.......................... .60 .60 1.20 1.20 1.20
Combined pro forma (c).............. .60 .60 1.20 1.20 1.20
SFP COMMON STOCK
Income (loss) from continuing
operations per share:
Historical (a)...................... $ .54 $ .72 $ .95 $ .11 $ .35
Pro forma equivalent (a)(d)......... .57 .62 1.00 .71 (.60)
Book value per share:
Historical.......................... 6.20 (b) 6.83 5.11 5.77
Pro forma equivalent (d)............ 6.26 (b) 6.29 (b) (b)
Cash dividends per share:
Historical.......................... -- -- .10 .10 .10
Pro forma equivalent (c)(d)......... .20 .20 .41 .41 .41
</TABLE>
- --------
(a) Income (loss) from continuing operations of certain periods includes the
impact of special items as set forth in "Selected Historical Financial
Data." Earnings (loss) per share from continuing operations (which are
before discontinued operations, extraordinary items and cumulative effect
of changes in accounting methods) adjusted to exclude these special items
were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
----------- -----------------
1994 1993 1993 1992 1991
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Adjusted combined pro forma basis.......... $1.49 $1.26 $2.76 $2.26 $1.43
SFP-Adjusted historical basis.............. .37 .26 .64 .50 .35
SFP-Adjusted pro forma equivalent basis
(d)....................................... .51 .43 .94 .77 .49
</TABLE>
(b) Not required.
(c) Cash dividends declared are assumed to be the same as those paid by BNI on
an historical basis.
(d) Calculated by multiplying combined pro forma amounts by the exchange ratio
of 0.34.
19
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial statements give effect
to the exchange of 0.34 shares of BNI Common Stock for each share of SFP Common
Stock pursuant to the Merger Agreement, with the Merger accounted for under the
pooling of interests method, and are identical to the unaudited pro forma
combined financial statements set forth in the Original Joint Proxy
Statement/Prospectus except for changes relating to the exchange ratio. The pro
forma adjustments do not reflect any potential increases in operating income
which may arise from the Merger or adjustments to conform BNI and SFP
accounting practices. See Note 3--Conforming accounting practices. See also
"Other Matters--Additional Financial Considerations" in the Original Joint
Proxy Statement/Prospectus.
The unaudited pro forma combined balance sheet as of June 30, 1994 combines
the historical consolidated balance sheets of BNI and SFP giving effect to the
Merger as if it had been consummated on that date. The unaudited pro forma
combined statements of operations for the six months ended June 30, 1994 and
1993, and for each of the three years in the period ended December 31, 1993,
combine the historical consolidated statements of operations of BNI and SFP
giving effect to the Merger as if it had been consummated on January 1, 1991.
The unaudited pro forma combined financial statements are prepared for
illustrative purposes only and are not necessarily indicative of the financial
position or results of operations that might have occurred had the Merger
actually taken place on the date indicated, or of future results of operations
or financial position of the combined company. Consummation of the Merger is
conditioned upon, among other things, approval of both BNI and SFP stockholders
and the approval of the ICC. See "Recent Developments." See also "Other
Matters--ICC Approval" and "The Merger Agreement--Conditions to the
Consummation of the Merger" included in the Original Joint Proxy
Statement/Prospectus.
The unaudited pro forma combined financial statements are based on the
historical consolidated financial statements of BNI and SFP and should be read
in conjunction with (i) such historical financial statements and the notes
thereto, which are incorporated by reference in this Supplemental Joint Proxy
Statement/Prospectus, (ii) the unaudited selected pro forma financial data,
including the notes thereto, appearing elsewhere in this Supplemental Joint
Proxy Statement/Prospectus and (iii) the selected historical financial data
included in the Original Joint Proxy Statement/Prospectus. See "Incorporation
of Certain Documents by Reference" and "Unaudited Selected Pro Forma Financial
Data." See "Selected Historical Financial Data" in the Original Joint Proxy
Statement/Prospectus.
20
<PAGE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF JUNE 30, 1994
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
HISTORICAL AMOUNTS
---------------------- BURLINGTON NORTHERN
BURLINGTON SANTA FE PRO FORMA SANTA FE
NORTHERN PACIFIC ADJUSTMENTS CORPORATION
INC. CORPORATION (NOTE 2) PRO FORMA
---------- ----------- ----------- -------------------
<S> <C> <C> <C> <C>
ASSETS
------
Current assets
Cash and cash
equivalents.......... $ 18 $ 15 $ -- $ 33
Accounts receivable,
net.................. 569 94 -- 663
Net assets of
discontinued
operations........... -- 504 (504)(A) --
Other current assets.. 449 292 -- 741
------ ------ ----- -------
Total current
assets............. 1,036 905 (504) 1,437
Property and equipment,
net.................... 6,074 4,542 -- 10,616
Other assets............ 284 270 -- 554
------ ------ ----- -------
Total assets........ $7,394 $5,717 $(504) $12,607
====== ====== ===== =======
LIABILITIES AND STOCKHOLDERS'
- -----------------------------
EQUITY
------
Current liabilities
Accounts payable...... $ 509 $ 266 $ 48 (C) $ 823
Dividend payable--gold
distribution......... -- 504 (504)(A) --
Other current
liabilities.......... 791 431 (23)(C) 1,199
Current portion of
long-term debt and
commercial paper..... 240 173 -- 413
------ ------ ----- -------
Total current
liabilities........ 1,540 1,374 (479) 2,435
Long-term debt.......... 1,694 932 -- 2,626
Deferred income taxes... 1,388 1,148 5 (C) 2,541
Other liabilities....... 742 1,107 -- 1,849
------ ------ ----- -------
Total liabilities... 5,364 4,561 (474) 9,451
------ ------ ----- -------
Stockholders' equity
Convertible preferred
stock................ 337 -- -- 337
Common stock.......... 1 190 (189)(B) 2
Paid-in capital....... 1,442 858 91 (B),(C) 2,391
Retained earnings..... 293 212 (61)(C) 444
Treasury stock........ (5) (104) 104 (B) (5)
Other................. (38) -- 25 (C) (13)
------ ------ ----- -------
Total stockholders'
equity............... 2,030 1,156 (30) 3,156
------ ------ ----- -------
Total liabilities
and stockholders'
equity............. $7,394 $5,717 $(504) $12,607
====== ====== ===== =======
</TABLE>
(See accompanying notes to unaudited pro forma combined financial statements)
21
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1994
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL AMOUNTS
---------------------- BURLINGTON NORTHERN
BURLINGTON SANTA FE SANTA FE
NORTHERN PACIFIC CORPORATION
INC. CORPORATION PRO FORMA
---------- ----------- -------------------
<S> <C> <C> <C>
Revenues...................... $2,402 $1,290 $3,692
Operating expenses
Compensation and benefits... 873 417 1,290
Fuel........................ 172 120 292
Materials................... 155 65 220
Equipment rents............. 217 122 339
Purchased services.......... 232 178 410
Depreciation................ 176 99 275
Other....................... 217 101 318
------ ------- -------
Total operating expenses.. 2,042 1,102 3,144
------ ------- -------
Operating income.............. 360 188 548
Interest expense.............. 78 60 138
Other income (expense), net... (6) 50 44
------ ------- -------
Income before income taxes.... 276 178 454
Income tax expense............ 107 75 182
------ ------- -------
Income from continuing
operations................... $ 169 $ 103 $ 272
====== ======= =======
Earnings per common share
Income from continuing
operations................. $ 1.75 $ .54 $ 1.69 Note 2 (D)
====== ======= =======
Number of shares used in
computation of earnings per
common share (in thousands).. 90,286 189,800 154,818 Note 2 (D)
</TABLE>
(See accompanying notes to unaudited pro forma combined financial statements)
22
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1993
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL AMOUNTS
---------------------- BURLINGTON NORTHERN
BURLINGTON SANTA FE SANTA FE
NORTHERN PACIFIC CORPORATION
INC. CORPORATION PRO FORMA
---------- ----------- -------------------
<S> <C> <C> <C>
Revenues...................... $2,312 $1,192 $3,504
Operating expenses
Compensation and benefits... 857 405 1,262
Fuel........................ 177 119 296
Materials................... 154 64 218
Equipment rents............. 188 105 293
Purchased services.......... 222 154 376
Depreciation................ 172 93 265
Other....................... 226 99 325
------ ------- -------
Total operating expenses.. 1,996 1,039 3,035
------ ------- -------
Operating income.............. 316 153 469
Interest expense.............. 69 70 139
Gain on sale of California
lines........................ -- 145 145
Other income, net............. -- 2 2
------ ------- -------
Income before income taxes.... 247 230 477
Income tax expense............ 93 95 188
------ ------- -------
Income from continuing
operations................... $ 154 $ 135 $ 289
====== ======= =======
Earnings per common share
Income from continuing
operations................. $ 1.60 $ .72 $ 1.82 Note 2 (D)
====== ======= =======
Number of shares used in
computation of earnings per
common share (in thousands).. 89,439 186,300 152,781 Note 2 (D)
</TABLE>
(See accompanying notes to unaudited pro forma combined financial statements)
23
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1993
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL AMOUNTS
---------------------- BURLINGTON NORTHERN
BURLINGTON SANTA FE SANTA FE
NORTHERN PACIFIC CORPORATION
INC. CORPORATION PRO FORMA
---------- ----------- -------------------
<S> <C> <C> <C>
Revenues...................... $4,699 $ 2,409 $ 7,108
Operating expenses
Compensation and benefits... 1,709 800 2,509
Fuel........................ 362 239 601
Materials................... 300 128 428
Equipment rents............. 395 229 624
Purchased services.......... 457 322 779
Depreciation................ 352 188 540
Other....................... 463 185 648
------ ------- -------
Total operating expenses.. 4,038 2,091 6,129
------ ------- -------
Operating income.............. 661 318 979
Interest expense.............. 145 133 278
Gain on sale of California
lines........................ -- 145 145
Other income, net............. 5 24 29
------ ------- -------
Income before income taxes.... 521 354 875
Income tax expense............ 225 177 402
------ ------- -------
Income from continuing
operations................... $ 296 $ 177 $ 473
====== ======= =======
Earnings per common share
Income from continuing
operations................. $ 3.06 $ .95 $ 2.94 Note 2 (D)
====== ======= =======
Number of shares used in
computation of earnings per
common share (in thousands).. 89,672 187,200 153,320 Note 2 (D)
</TABLE>
(See accompanying notes to unaudited pro forma combined financial statements)
24
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1992
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL AMOUNTS
----------------------
BURLINGTON NORTHERN
BURLINGTON SANTA FE SANTA FE
NORTHERN PACIFIC CORPORATION
INC. CORPORATION PRO FORMA
---------- ----------- -------------------
<S> <C> <C> <C>
Revenues...................... $4,630 $ 2,252 $ 6,882
Operating expenses
Compensation and benefits... 1,709 799 2,508
Fuel........................ 348 206 554
Materials................... 295 128 423
Equipment rents............. 389 186 575
Purchased services.......... 449 277 726
Depreciation................ 338 181 519
Other....................... 505 178 683
Special charge.............. -- 320 320
------ ------- -------
Total operating expenses.. 4,033 2,275 6,308
------ ------- -------
Operating income (loss)....... 597 (23) 574
Interest expense.............. 186 165 351
Gain on sale of California
lines........................ -- 205 205
Other income, net............. 41 24 65
------ ------- -------
Income before income taxes.... 452 41 493
Income tax expense............ 153 20 173
------ ------- -------
Income from continuing
operations................... $ 299 $ 21 $ 320
====== ======= =======
Earnings per common share
Income from continuing
operations................. $ 3.35 $ .11 $ 2.09 Note 2 (D)
====== ======= =======
Number of shares used in
computation of earnings per
common share (in thousands).. 88,617 184,800 151,449 Note 2 (D)
</TABLE>
(See accompanying notes to unaudited pro forma combined financial statements)
25
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1991
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL AMOUNTS
----------------------
BURLINGTON NORTHERN
BURLINGTON SANTA FE SANTA FE
NORTHERN PACIFIC CORPORATION
INC. CORPORATION PRO FORMA
---------- ----------- -------------------
<S> <C> <C> <C>
Revenues...................................... $4,559 $ 2,154 $ 6,713
Operating expenses
Compensation and benefits................... 1,756 782 2,538
Fuel........................................ 368 207 575
Materials................................... 283 135 418
Equipment rents............................. 401 162 563
Purchased services.......................... 442 232 674
Depreciation................................ 347 184 531
Other....................................... 493 197 690
Special charge.............................. 708 -- 708
------ ------- -------
Total operating expenses.................. 4,798 1,899 6,697
------ ------- -------
Operating income (loss)....................... (239) 255 16
Interest expense.............................. 226 209 435
Other income (expense), net................... (25) 53 28
------ ------- -------
Income (loss) before income taxes............. (490) 99 (391)
Income tax expense (benefit).................. (184) 37 (147)
------ ------- -------
Income (loss) from continuing operations...... $ (306) $ 62 $ (244)
====== ======= =======
Earnings (loss) per common share
Income (loss) from continuing operations.... $(3.96) $ .35 $ (1.77) Note 2 (D)
====== ======= =======
Number of shares used in computation of
earnings
(loss) per common share (in thousands)....... 77,462 178,000 137,982 Note 2 (D)
</TABLE>
(See accompanying notes to unaudited pro forma combined financial statements)
26
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
Pursuant to the Merger Agreement, each share of SFP Common Stock outstanding
at the Effective Time will be converted into 0.34 shares of BNI Common Stock.
The Merger will be accounted for under the pooling of interests method.
Accordingly, recorded assets and liabilities are carried forward to the
combined company at their historical values.
The accompanying unaudited pro forma combined financial statements are
presented for illustrative purposes only and do not give effect to any
potential increases in operating income which may arise from the Merger. See
"Other Matters--Additional Financial Considerations" in the Original Joint
Proxy Statement/Prospectus. Additionally, the unaudited pro forma combined
financial statements exclude the nonrecurring costs and expenses associated
with integrating the operations of the businesses. Such nonrecurring costs are
expected to relate to the elimination of duplicate facilities, computer systems
and other assets, as well as employee related payments. Additionally, no
provision has been made for any make-whole premium payable in connection with
certain of SFP's debt securities upon consummation of the Merger. See "Other
Matters--Acceleration of Certain Debt Obligations of SFP" in the Original Joint
Proxy Statement/Prospectus.
For consistency of presentation, certain amounts in the historical financial
statements have been reclassified in the unaudited pro forma combined financial
statements.
NOTE 2. PRO FORMA ADJUSTMENTS
(A) Discontinued operations
Net assets of discontinued operations and dividend payable--gold distribution
have been eliminated to reflect SFP's distribution of SFP Gold's common stock
to SFP stockholders, effective September 30, 1994.
(B) Stockholders' equity
Common stock has been reduced by $189 million, paid-in capital has been
increased by $85 million and treasury stock has been decreased by $104 million
to reflect the combination of BNI and SFP through the exchange of approximately
65 million shares of BNI Common Stock for all outstanding shares of SFP Common
Stock at an exchange ratio of 0.34 shares of BNI Common Stock for each share of
SFP Common Stock.
(C) Costs of the Merger and accelerated vesting of restricted stock
Accounts payable have been increased by $48 million for the cost of the
Merger as if they have been accrued. Additionally, paid-in capital and other
equity have been increased by $6 million and $25 million, respectively, as if
compensation expense totaling $31 million had been recorded for the lapse of
restrictions on restricted stock of BNI and SFP. Deferred income taxes and
current tax liabilities have been adjusted by $18 million for the tax effects
of these entries. The result is a net reduction in retained earnings of $61
million.
Compensation expense related to restricted stock, as well as certain other
costs of the Merger, will be charged to operations upon stockholder approval of
the Merger. Other costs of the Merger will be recorded periodically as charges
to operations between stockholder approval and the consummation of the Merger.
(D) Earnings (loss) per common share
Pro forma weighted average shares outstanding represent the conversion at an
exchange ratio of 0.34 of SFP common shares to BNI common shares. Earnings
(loss) per common share are determined by dividing income (loss) from
continuing operations, after deduction of preferred stock dividends, by the
weighted average number of common shares outstanding and common share
equivalents.
NOTE 3. CONFORMING ACCOUNTING PRACTICES
No adjustments to conform the accounting practices of BNI and SFP have been
made in these unaudited pro forma combined financial statements for
capitalization of assets, depreciation and other areas. The effects of these
changes are not presently determinable but will be recorded after the
consummation date.
27
<PAGE>
MARKET PRICES
On October 27, 1994, the closing prices of BNI Common Stock and SFP Common
Stock as reported in The Wall Street Journal on October 28, 1994, were $50 per
share and $15 1/4 per share, respectively.
On October 27, 1994, 0.34 of a share of BNI Common Stock (based on the
closing price as reported by The Wall Street Journal on October 28, 1994) had a
value of $17.00.
BNI AND SFP STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR
THE BNI COMMON STOCK AND THE SFP COMMON STOCK IN CONNECTION WITH VOTING THEIR
SHARES.
EXPERTS
The consolidated financial statements of BNI as of December 31, 1993 and 1992
and for each of the three years in the period ended December 31, 1993,
incorporated by reference in this Supplemental Joint Proxy
Statement/Prospectus, have been incorporated herein by reference in reliance on
the report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of that firm as experts in accounting and auditing.
The consolidated financial statements of SFP as of December 31, 1993 and 1992
and for each of the three years in the period ended December 31, 1993,
incorporated by reference in this Supplemental Joint Proxy Statement/Prospectus
to SFP's Form 8-K/A dated October 5, 1994, have been so incorporated in
reliance on the reports of Price Waterhouse LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
LEGAL MATTERS
The validity of the BNI Common Stock offered hereby and pursuant to the
Original Joint Proxy Statement/Prospectus will be passed upon by Francis T.
Kelly, Esq., Securities and Finance Counsel of BNI. Mr. Kelly owns 4,030 shares
of BNI Common Stock (2,788 shares subject to risk of forfeiture) and holds
options to purchase 7,381 shares of BNI Common Stock.
Under the Merger Agreement, after approval of the Merger by SFP's
stockholders, SFP's Board will no longer have any right to negotiate with or
provide confidential information to third parties, and SFP will not be able to
accept a better offer for a business combination. BNI's Board is subject to the
same restrictions after approval of the Merger by its stockholders. The
Chancery Court has noted that it retains the power to grant relief sought by
any of the plaintiffs, regardless of SFP stockholder approval at the SFP
Special Meeting. See "Recent Developments--Certain Pending Litigation."
However, SFP believes that a fully-informed stockholder vote in favor of the
Merger may preclude relief for the plaintiffs.
OTHER BUSINESS AT THE SPECIAL MEETINGS;
STOCKHOLDER PROPOSALS
UPC has announced that it intends to disseminate proxy materials soliciting
proxies from SFP stockholders in opposition to the Merger. Other than UPC's
action at the SFP Special Meeting, BNI management and SFP management know of no
other matters that may properly be, or which are likely to be, brought before
the BNI Special Meeting or the SFP Special Meeting, respectively. However, if
any other matters are properly brought before such Special Meetings, the
persons named in the enclosed proxy or their substitutes will vote the proxies
in accordance with the recommendations of management.
28
<PAGE>
APPENDIX A
AMENDMENT
TO
AGREEMENT AND PLAN OF MERGER
<PAGE>
AMENDMENT
TO
AGREEMENT AND PLAN OF MERGER
AMENDMENT dated as of October 26, 1994 (this "Amendment") between Burlington
Northern Inc., a Delaware corporation ("BNI"), and Santa Fe Pacific
Corporation, a Delaware Corporation ("SFP").
WHEREAS, BNI and SFP have previously entered into that certain Agreement and
Plan of Merger dated as of June 29, 1994 between BNI and SFP (the "Merger
Agreement"); and
WHEREAS, the respective Boards of Directors of BNI and SFP have determined
that it is in the best interests of BNI or SFP, as the case may be, and its
respective stockholders to amend the Merger Agreement as hereinafter set forth
and have duly approved this Amendment and authorized its execution and
delivery.
NOW, THEREFORE, the parties hereto agree as follows:
1. All capitalized terms used herein, unless otherwise defined herein,
shall have the meanings given them in the Merger Agreement, and each
reference in the Merger Agreement to "this Agreement", "hereof", "herein",
"hereunder" or "hereby" and each other similar reference shall be deemed to
refer to the Merger Agreement as amended hereby. All references to the
Merger Agreement in any other agreement between BNI and SFP relating to the
transactions contemplated by the Merger Agreement shall be deemed to refer
to the Merger Agreement as amended hereby.
2. Section 1.2(a)(i) of the Merger Agreement is hereby amended by
deleting the number "0.27" wherever such number appears therein and
inserting in its place the number "0.34".
3. This Amendment shall be construed in accordance with and governed by
the law of the State of Delaware (without regard to principles of conflict
of laws).
4. This Amendment may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument. This Amendment shall
become effective when each party hereto shall have received counterparts
hereof signed by all of the other parties hereto.
5. Except as expressly amended hereby, the Merger Agreement shall remain
in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed by their respective authorized officers as of the day and year first
above written.
Burlington Northern Inc.
By /s/ Gerald Grinstein
----------------------------------
Title: Chairman and Chief
Executive Officer
Santa Fe Pacific Corporation
By /s/ Robert D. Krebs
----------------------------------
Title: Chairman, President and
Chief Executive Officer
<PAGE>
APPENDIX B
OPINION OF LAZARD FRERES & CO.
<PAGE>
Lazard Freres & Co.
One Rockefeller Plaza
New York, N.Y. 10020
----
Telephone (212) 632-6000 New York
Facsimile (212) 632-6060
October 28, 1994
The Board of Directors
Burlington Northern Inc.
3800 Continental Plaza
777 Main Street
Fort Worth, Texas 76102
Dear Members of the Board:
We understand that Burlington Northern Inc. ("BN") and Santa Fe Pacific
Corporation ("SF") have entered into an Agreement and Plan of Merger dated as
of June 29, 1994, as amended by the Amendment thereto dated as of October 26,
1994 (as so amended, the "Agreement"), pursuant to which, among other things,
SF shall be merged with and into BN, with BN as the surviving corporation (the
"Merger"). Under the terms of the Agreement, upon consummation of the Merger,
each share of Common Stock, par value $1.00 per share (the "SF Common Stock"),
of SF outstanding immediately prior to the effective time of the Merger shall
be converted into .34 of a share of Common Stock, no par value (the "BN Common
Stock"), of BN (the "Exchange Ratio"). We further understand that the board of
directors of SF has declared a special dividend of the stock of Santa Fe
Pacific Gold Corporation owned by SF which was distributed on September 30,
1994 to SF shareholders (the "Spinoff") and that SF has received a private
letter ruling from the Internal Revenue Service to the effect that the Spinoff
qualifies as a tax-free distribution within the meaning of Section 355 of the
Internal Revenue Code of 1986, as amended. The terms and conditions of the
Merger are more fully set forth in the Agreement.
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of BN Common Stock of the Exchange Ratio pursuant to the
Agreement.
Lazard Freres & Co. has acted as financial advisor to BN in connection with
this transaction and will receive a fee for our services, a substantial portion
of which is contingent upon closing of the transaction. In connection with this
opinion, we have:
(i) reviewed the terms and conditions of the Agreement;
(ii) analyzed certain historical business and financial information
relating to BN and SF, including the Annual Reports to Stockholders and
Annual Reports on Form 10-K of BN and SF for each of the fiscal years ended
December 31, 1989 through 1993 (and any amendments thereto), Quarterly
Reports on Form 10-Q of BN and SF for the quarters ended March 31, June 30
and September 30 for each of the same fiscal years and for the quarters
ended March 31 and June 30, 1994 (and any amendments thereto), Current
Reports on Form 8-K of BN dated June 29 and October 6, 1994 and Current
Reports on Form 8-K of SF dated June 29, August 3 and October 5, 1994 (and
any amendments thereto);
(iii) reviewed certain financial forecasts and other data provided to us
by BN and SF relating to their respective businesses;
(iv) held discussions with members of the senior management of BN and SF
with respect to the businesses and prospects of BN and SF, respectively,
the strategic objectives of each, and possible benefits which might be
realized following the Merger;
(v) reviewed public information with respect to certain other companies
in lines of businesses we believe to be comparable to the businesses of BN
and SF;
B-1
<PAGE>
(vi) reviewed the financial terms of certain recent business combinations
involving companies in lines of businesses we believe to be comparable to
those of BN and SF, and in other industries generally;
(vii) analyzed the pro forma financial impact of the Merger on BN and SF;
(viii) reviewed the historical stock prices and trading volumes of the BN
Common Stock and SF Common Stock;
(ix) reviewed the Joint Proxy Statement/Prospectus dated October 12, 1994
and the Supplemental Joint Proxy Statement/Prospectus dated the date
hereof; and
(x) conducted such other financial studies, analyses and investigations
as we deemed appropriate.
We have relied upon the accuracy and completeness of the financial and other
information provided by BN and SF to us and have not assumed any responsibility
for independent verification of such information or any independent valuation
or appraisal of any of the assets of BN or SF. With respect to the financial
forecasts referred to above, we have assumed that they have been reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the respective managements of BN and SF as to the future financial
performance of their businesses. Further, our opinion is necessarily based on
economic, monetary, market and other conditions as in effect on, and the
information made available to us as of, the date hereof.
In rendering our opinion, we have also assumed that obtaining the necessary
regulatory and governmental approvals for the Merger, including approval of the
Interstate Commerce Commission, may significantly delay the consummation of the
Merger, and that, in the course of obtaining such approvals, no restriction
will be imposed that will have a material adverse effect on the contemplated
benefits of the Merger to BN.
Our engagement and the opinion expressed herein are solely for the benefit of
BN's Board of Directors and are not on behalf of, and are not intended to
confer rights or remedies upon, SF, any stockholders of BN or SF or any other
person other than BN's Board of Directors. It is understood that, except for
inclusion in a proxy statement relating to the Merger, this letter may not be
disclosed or otherwise referred to without our prior written consent, except as
may otherwise be required by law or by a court of competent jurisdiction.
Based on and subject to the foregoing and such other factors as we deem
relevant, we are of the opinion that, as of the date hereof, the Exchange Ratio
is fair to the holders of BN Common Stock from a financial point of view.
Very truly yours,
LAZARD FRERES & CO.
B-2
<PAGE>
APPENDIX C
OPINION OF GOLDMAN, SACHS & CO.
<PAGE>
PERSONAL AND CONFIDENTIAL
October 28, 1994
Board of Directors
Santa Fe Pacific Corporation
1700 East Golf Road
Schaumburg, Illinois 60173-5860
Gentlemen and Madame:
You have requested our opinion as to the fairness to the holders of the
outstanding shares of common stock, par value $1.00 per share (the "Common
Stock"), of Santa Fe Pacific Corporation (the "Company") of the exchange ratio
of 0.34 shares of common stock, with no par value, of Burlington Northern, Inc.
("BNI Common Stock") to be received for each share of Common Stock (the
"Exchange Ratio") pursuant to the Agreement and Plan of Merger, dated as of
June 29, 1994, as amended on October 26, 1994, among Burlington Northern, Inc.
("BNI") and the Company (the "Agreement") in connection with the merger of the
Company with and into BNI (the "Merger").
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having performed various investment banking services
for the Company from time to time, including having acted as managing and co-
managing underwriter of public offerings of Common Stock of the Company in
October 1991 and June 1992, respectively, having acted as financial advisor on
the asset exchange between the Company and Hanson Natural Resources Company in
June 1993, having acted as managing underwriter of a public offering of Common
Stock of Santa Fe Pacific Gold Corporation, a subsidiary of the Company, in
June of 1994 as well as having acted as the Company's financial advisor in
connection with, and having participated in certain of the negotiations leading
to, the Agreement. We also have provided certain investment banking services to
BNI from time to time, including acting as co-managing underwriter of a public
offering of BNI Common Stock in November 1991, acting as managing underwriter
of a public offering of 6 1/4% Cumulative Convertible Preferred Stock in
November 1992, and acting as a co-managing underwriter in a public offering of
7 1/2% Debentures due 2002 in July 1993, and we may provide investment banking
services to BNI in the future.
In connection with this opinion, we have reviewed, among other things, the
Agreement; the Joint Proxy Statement/Prospectus; the Supplemental Joint Proxy
Statement/Prospectus; Annual Reports to Stockholders and Annual Reports on Form
10-K of the Company and BNI for the five years ended December 31, 1993 (and any
amendments thereto); certain interim reports to stockholders and Quarterly
Reports on Form 10-Q of the Company and BNI (and any amendments thereto);
certain other communications from the Company and BNI to their respective
stockholders; certain Current Reports on Form 8-K of the Company and BNI; and
certain internal financial analyses and forecasts for the Company and BNI
prepared by their respective managements. We also have held discussions with
members of the senior management of the Company and BNI regarding the past and
current business operations, financial condition and future prospects of their
respective companies. Furthermore, we have considered the views of the senior
management of the Company regarding the strategic importance of, and potential
synergies expected to be realized from, the Merger. In addition, we have
reviewed the reported price and trading activity for the Common Stock and BNI
Common Stock, compared certain financial and stock market information for the
Company and BNI with similar information for certain other companies the
securities of which are publicly traded, reviewed the financial terms of
certain recent business combinations in the railroad industry specifically and
in other industries generally and performed such other studies and analyses as
we considered appropriate.
C-1
<PAGE>
Santa Fe Pacific Corporation
October 28, 1994
Page Two
We have relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by us for
purposes of this opinion. In addition, we have not made an independent
evaluation or appraisal of the assets and liabilities of the Company or BNI or
any of their respective subsidiaries and we have not been furnished with any
such evaluation or appraisal. We have assumed with your consent that the Merger
will be accounted for as a pooling of interests under generally accepted
accounting principles and that the transaction will receive regulatory approval
in the manner contemplated by the Agreement.
Management of the Company has advised us that in its opinion there are
significant contingencies associated with the proposal, dated October 5, 1994,
from Union Pacific Corporation (the "UPC Proposal") and counsel to the Company
has advised the Company's Board of Directors and management that there are
significant legal uncertainties relating to the consummation of such proposal.
We have assumed with your consent that this advice was correct and that in
analyzing the Exchange Ratio we need not take into account the consideration
which might be received under the UPC Proposal.
Based upon and subject to the foregoing and based upon such other matters as we
consider relevant, it is our opinion that as of the date hereof the Exchange
Ratio pursuant to the Agreement is fair to the holders of outstanding shares of
Common Stock.
Very truly yours,
GOLDMAN, SACHS & CO.
C-2
<PAGE>
BURLINGTON
NORTHERN
INC.
- --------------------------------------------------------------------------------
NOTICE OF
YOUR VOTE IS IMPORTANT SPECIAL MEETING
YOUR MANAGEMENT WILL APPRECIATE THE OF STOCKHOLDERS
PROMPT RETURN OF YOUR SIGNED PROXY SO AND
THE SHARES YOU OWN WILL BE REPRESENTED PROXY STATEMENT
AT THE SPECIAL MEETING OF STOCKHOLDERS.
- --------------------------------------------------------------------------------
TO BE HELD AT
BURLINGTON NORTHERN RAILROAD COMPANY
3017 LOU MENK DRIVE
FORT WORTH, TEXAS
NOVEMBER 18, 1994
10:00 A.M. FORT WORTH TIME
