<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________
Amendment No. 3
To
SCHEDULE 14D-9
Solicitation/Recommendation Statement Pursuant
to Section 14(d)(4) of the Securities Exchange Act of 1934
________________
CHICAGO AND NORTH WESTERN TRANSPORTATION COMPANY
(Name of Subject Company)
CHICAGO AND NORTH WESTERN TRANSPORTATION COMPANY
(Names of Person(s) Filing Statement)
Common Stock, Par Value $0.01 Per Share
(Title of Class of Securities)
167155 10 0
(CUSIP Number of Class of Securities)
________________
ROBERT SCHMIEGE
Chairman of the Board, President and Chief Executive Officer
Chicago and North Western Transportation Company
165 North Canal Street
Chicago, Illinois 60606-1551
(312) 559-7000
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications
on Behalf of the Person(s) filing Statement)
________________
With a copy to:
PAUL J. MILLER, ESQ.
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606
(312) 876-8074
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This Amendment supplements and amends as Amendment No. 3 the
Solicitation/Recommendation Statement on Schedule 14D-9, originally filed on
March 23, 1995 and amended by Amendment No. 1 thereto filed on March 30, 1995
and Amendment No. 2 filed on April 3, 1995 (the "Schedule 14D-9), by Chicago and
North Western Transportation Company, a Delaware corporation (the "Company"),
relating to the tender offer by UP Rail, Inc. (the "Purchaser"), a Utah
corporation and an indirect wholly-owned subsidiary of Union Pacific
Corporation, a Utah corporation ("Union Pacific"), initially disclosed in a
Tender Offer Statement on Schedule 14D-1, dated March 23, 1995, to purchase all
of the outstanding shares of common stock, par value $.01 per share (the
"Shares"), of the Company at $35 per Share, net to the sellers thereof in cash,
upon the terms and subject to the conditions set forth in the Offer to Purchase,
dated March 23, 1995 (the "Offer to Purchase"), and the related Letter of
Transmittal. Capitalized terms used and not otherwise defined herein shall have
the meanings set forth in the Schedule 14D-9.
Item 3. Identity and Background
Item 3(b) of the Schedule 14D-9 is hereby supplemented by
adding the following information:
As previously disclosed in the Offer to Purchase under the
caption "SPECIAL FACTORS - Interests of Certain Persons in the
Transaction," the Company and Union Pacific Railroad Company
("UPRC") have offered three-year employment agreements to certain
executives which, if accepted by the executives, will replace the
Change of Control Employment Agreements which the executives now
have with the Company. In addition, in order to implement the
terms of the severance arrangements described in the Offer to
Purchase, the Company, UPRC and Chicago and North Western Railway
Company have offered severance agreements to certain executives who
have Change of Control Employment Agreements with the Company. A
form of the employment agreements and severance agreements being
offered are attached hereto as Exhibits 36 and 37, respectively,
and are incorporated herein by reference.
Item 8. Additional Information
Item 8 of the Schedule 14D-9 is hereby supplemented by adding
the following information:
On April 4, 1995, Union Pacific, UPRC, Missouri Pacific
Railroad Company ("MPRR") and the Company submitted to the ICC a
petition for a determination that the terms of the Merger are just
and reasonable.
A copy of such petition is attached hereto as Exhibit 38 and
incorporated herein by reference.
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Item 9. Material to be Filed as Exhibits
Item 9 of the Schedule 14D-9 is hereby supplemented by adding
the following information:
Exhibit 36 - Form of employment agreement to be entered into
by the Company, UPRC and certain executives of the Company.
Exhibit 37 - Form of severance agreement to be entered into by
the Company, UPRC, Chicago and North Western Railway Company
and certain executives of the Company.
Exhibit 38 - Petition for a determination that the terms of
the Merger are just and reasonable, filed with the ICC on
April 4, 1995, by Union Pacific, UPRC, MPRR and the Company.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement
is true, complete and correct.
CHICAGO AND NORTH WESTERN
TRANSPORTATION COMPANY
By: /s/RONALD J. CUCHNA
Date: April 6, 1995
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EXHIBIT INDEX
Exhibit No. Description
----------- -----------
Exhibit 99.36 Form of employment agreement to be
entered into by the Company, UPRC
and certain executives of the
Company.
Exhibit 99.37 Form of severance agreement to be
entered into by the Company, UPRC,
Chicago and North Western Railway
Company and certain executives of
the Company.
Exhibit 99.38 Petition for a determination that
the terms of the Merger are just and
reasonable, filed with the ICC on
April 4, 1995, by Union Pacific,
UPRC, MPRR and the Company.
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EXHIBIT 99.36
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT made and entered into by and between Chicago
and North Western Transportation Company ("CNW"), Union Pacific
Railroad Company (the "Company") and ___________________ (the
"Employee") dated this ___ day of April, 1995.
W I T N E S S E T H :
WHEREAS, Employee is presently employed by CNW as an
executive;
WHEREAS, CNW, Union Pacific Corporation and UP Rail, Inc.
have entered into an Agreement and Plan of Merger dated as of March
16, 1995 (the "Merger Agreement") under which CNW will merge with
a subsidiary of Union Pacific Corporation; and
WHEREAS, the Employer (as defined in Section 1 hereof) is
desirous of assuring the continuing employment of Employee as an
executive of the Employer after the date of consummation of the
merger contemplated in the proposed Merger Agreement (the "Merger
Date") and the Employee is desirous of such continuing employment;
NOW, THEREFORE, in consideration of the mutual promises
and agreements contained herein, the parties hereto agree as
follows (this Agreement to be binding upon the parties upon its
execution, but to become effective immediately upon the later of
such execution or the consummation of the "Offer" (as defined in
the Merger Agreement)):
1. Employer. In this Agreement the term "Employer"
shall mean CNW from the date hereof through the Merger Date (or
through the end of the Term, if the Merger Date shall not occur
<PAGE>
prior thereto) and shall mean the Company or a Company-designated
affiliate (including CNW) beginning the day immediately following
the Merger Date.
2. Term. Employer hereby agrees to continue employing
Employee and Employee agrees to be so employed for a period
commencing as of the date hereof (the "Effective Date") and contin-
uing through the third anniversary of the Merger Date (the "Term")
or such earlier termination date as hereinafter set forth (the
"Employment Period").
3. Duties. During the Employment Period hereof, and
excluding any periods of vacation or sick leave to which the
Employee is entitled or periods of the Employee's physical or
mental incapacity, Employee agrees to devote the Employee's full
time and best efforts in the discharge of the duties assigned by
the Employer. It shall not be a violation of this Agreement for
the Employee to serve on corporate, civic or charitable boards or
committees, so long as such activities are consistent with the
policies of the Employer (as from time to time amended) and do not
interfere with the performance of the Employee's duties in
accordance with this Agreement.
4. Compensation.
(a) As remuneration for the full-time services to
be rendered to the Employer during the Employment Period, Employee
shall be paid annually no less than (i) the Employee's annual base
salary in effect immediately prior to the date hereof and (ii) the
Employee's "Annual Bonus Amount", which shall be equal to the bonus
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paid to the Employee with respect to 1994 (which is agreed to have
been 73% of the possible maximum bonus for the Employee for such
year). Annual base salary shall be paid in a manner and frequency
consistent with the pay practices of the Employer. For calendar
year 1995, the Annual Bonus Amount payable to the Employee by the
Employer shall be reduced by any bonus paid to the Employee by CNW
attributable to performance in 1995 prior to the Merger Date.
(b) After January 1, 1996, (i) Employee shall have
an opportunity to receive such benefits as are provided to other
comparable employees of the Employer performing similar services,
including, but not limited to, if applicable, group life and health
insurance benefits, pension and profit sharing benefits, deferred
compensation benefits, vacations and expense reimbursements, and
Employee shall be given service credit under each of Employer's
benefit plans for all years of service for which Employee had
received credit under the comparable plans of Chicago and North
Western Railway Company, subject to reduction for any benefits to
which such employee is entitled from Chicago and North Western
Railway Company under its similar benefit plans (the similar
benefit plans with respect to the Pension Plan for Salaried Employ-
ees of Union Pacific Corporation and Affiliates being the Chicago
and North Western Transportation Company Supplemental Pension Plan
and the Chicago and North Western Transportation Company Profit
Sharing and Retirement Savings Program).
5. Payments on Termination of Employment.
Notwithstanding the provisions of Section 2 hereof, Employee's em-
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ployment hereunder may be terminated during the Employment Period
upon the occurrence of any of the events described in clauses (i)
through (vi) of this Section 5. If the termination event is de-
scribed in clause (i) or (iv), the Employer shall pay to the Em-
ployee, within the five days immediately following the date of such
termination of employment, a lump sum amount equal to the present
value (calculated using a discount rate based on 120% of the appli-
cable Federal rate under Section 1274(d) of the Internal Revenue
Code of 1986, as amended from time to time) of the aggregate base
salary and bonus otherwise payable to the Employee through the end
of the Term under this Agreement (such base salary amount to be
calculated using the greater of the base salary in effect
immediately prior to the date hereof or the base salary in effect
immediately prior to such termination event and such bonus amount
to be calculated using the deemed annual bonus determined under
Section 4(a) hereof). If the termination event is described in
clause (ii), (iii), (v) or (vi), the Employee (or the Employee's
estate, in case of clause (ii)) shall forfeit the Employee's right
to any and all compensation and benefits the Employee would have
been entitled to receive pursuant to this Agreement with respect to
any employment period which would otherwise have followed the date
of such termination, but, except for rights or benefits under the
Employee's Change of Control Employment Agreement dated as of
December 20, 1994, Employee shall not forfeit any rights or bene-
fits Employee would otherwise receive or retain in the absence of
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this Agreement. The above-referenced events of termination are as
follows:
(i) At any time by the Employer, without cause
(as defined in Section 5(vi) hereof); or
(ii) In the event of Employee's death; or
(iii) By the Employer in the event Employee is
unable to perform Employee's services hereunder for a
continuous period of six (6) months by reason of
Employee's physical or mental illness or incapacity, as
determined in good faith by the Employer; or
(iv) At the option of the Employee following the
occurrence of good reason, which, for purposes of this Agree-
ment, shall mean a reduction by the Employer of the Employee's
annual base salary or bonus;
(v) By the Employee, without good reason (as
defined in Section 5(iv) hereof); or
(vi) At any time during the Employment Period
by the Employer, for cause, which, for purposes of this
Agreement, shall mean any theft, conviction of a felony,
dishonesty, fraudulent misconduct, grossly inadequate
performance, willful malfeasance, willful or intentional
negligence or a grossly negligent act, disclosure of
trade secrets, gross dereliction of duty, a material
breach of this Agreement by the Employee or other grave
misconduct on the part of Employee.
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6. Confidentiality. Employee agrees not to disclose in
any manner information about the Employer obtained by Employee
while employed by the Employer, other than information generally
available to the public. Employee agrees to return immediately to
the Employer all written material and other property containing
such information, as well as any other property belonging to the
Employer.
7. Noncompetition. Until the earlier of one year
following the expiration of the Term or on the first anniversary of
the termination of the Employee's active employment hereunder,
Employee agrees that the Employee shall not, except as permitted by
the Employer upon its prior written consent, engage in, be employed
by, or in any way advise or act for, or have any financial interest
in any business which is a competitor of the Employer.
8. Severability. This Agreement is to be governed by
and construed according to the laws of the State of Nebraska,
without regard to such state's choice of law rules. If any provi-
sion of this Agreement shall be held invalid and unenforceable for
any reason whatsoever, such provision shall be deemed deleted and
the remainder of the Agreement shall remain in effect and be valid
and enforceable without such provision.
9. Amendments. This Agreement supersedes and replaces
any other Agreement between the parties relating to employment,
including the Change in Control Employment Agreement, signed by CNW
and the Employee and dated as of December 20, 1994. Prior to the
Merger Date, this Agreement may be modified only by a writing
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signed by the parties hereto. After the Merger Date, this Agree-
ment may be modified only by a writing signed by the Employee and
the Employer (or any successor thereto).
10. Continuing Liability. Unless this Agreement or
Employee's employment hereunder is terminated in accordance with
the express provisions hereof, the parties shall have no right to
terminate this Agreement or the Employee's employment hereunder.
11. Waiver and Amendment of Three Agreements. The Em-
ployee, if a party thereto, agrees to amend (i) the Second Amended
and Restated Stockholders Agreement, dated as of March 30, 1992, as
amended, (ii) an agreement, dated as of June 21, 1993 among the
parties to such Stockholders Agreement, and (iii) the Registration
Rights Agreement, dated July 14, 1989, as amended (collectively,
the "Three Agreements"), to provide that they shall terminate upon
the "Effective Time" of the proposed merger between UP Rail, Inc.
and Chicago and North Western Transportation Company (as "Effective
Time" is defined in the Agreement and Plan of Merger by and among
Union Pacific Corporation, UP Rail, Inc. and Chicago and North
Western Transportation Company dated as of March 16, 1995).
Further, the Employee agrees to waive (effective as of the Effec-
tive Time) any and all rights under each of the Three Agreements to
which the Employee is a party.
12. The Employer's obligation to make the payments
provided for in this Agreement and otherwise to perform its
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obligations hereunder shall not be affected by any circumstances,
including, without limitation, set-off, counterclaim, recoupment,
defense or other claim, right or action which the Employer may have
against the Employee or others. In no event shall the Employee be
obligated to seek other employment or take any other action by way
of mitigation of the amounts payable to the employee under any of
the provisions of the Agreement, nor shall the amount of any
payment hereunder be reduced by any compensation earned by the Em-
ployee as a result of employment by another employer.
IN WITNESS WHEREOF, both CNW and the Company have caused
this Agreement to be executed by one of their
duly authorized officers and Employee has executed this Agreement
as of the dates specified below.
EMPLOYEE:
Date: , 1995 __________________________
CHICAGO AND NORTH WESTERN
TRANSPORTATION COMPANY:
Date: , 1995 By:________________________
Title:_____________________
UNION PACIFIC RAILROAD COMPANY:
Date: , 1995 By:_________________________
Barbara Schaefer
Title: Vice President,
Human Resources
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<PAGE>
EXHIBIT 99.37
This agreement, release and waiver (the "Agreement") is made
as of the ____ day of ______________, 1995, by and between CHICAGO
AND NORTH WESTERN TRANSPORTATION COMPANY, an Illinois corporation
having its principal place of business in the State of Illinois,
CHICAGO AND NORTH WESTERN RAILWAY COMPANY, a Delaware corporation
having its principal place of business in the State of Illinois
(collectively with their subsidiaries, and affiliates, the
"Company"), UNION PACIFIC RAILROAD COMPANY, a Utah corporation
having its principal place of business in the State of Nebraska
(collectively with its subsidiaries and affiliates, "Union
Pacific"), and __________________, a resident of Illinois (the
"Executive").
The Executive and the Company entered into a Change in Control
Employment Agreement (the "Employment Agreement") dated as of
December 20, 1994.
The Executive's employment with the Company shall terminate on
the "Date of Termination," which shall be (i) the later of
April 24, 1995, or the day following the last day of the revocation
period described in paragraph 11 or (ii) such earlier date as may
be agreed upon by the Company and the Executive; provided, however,
that the Date of Termination shall in no event occur before the
consummation of the "Offer" (as defined in the Merger Agreement de-
scribed in paragraph 2 hereof).
The Company and the Executive desire to settle all rights,
duties and obligations between them, including without limitation
all such rights, duties and obligations arising under the
Employment Agreement or otherwise out of the Executive's employment
by the Company.
In consideration of the representations, covenants and mutual
promises set forth in this Agreement, it is hereby agreed as
follows:
1. Benefits. Provided this Agreement has been executed and
the revocation period described in paragraph 11 hereof
has passed, the Company shall pay, or cause the Executive
to be paid on the Date of Termination, the following
amounts which have been limited in accordance with the
provisions of paragraph 6(a) of the Employment Agreement
as determined by the Company and agreed to by Executive
(determined without regard to the payment specified in
paragraph 2 below):
<PAGE>
(a) with respect to all earned but unpaid salary and
all accrued but unused 1995 vacation days through
the Date of Termination, $_____________;
(b) with respect to the Chicago and North Western
Transportation Company Bonus Plan (the "Bonus
Plan") for the period from January 1, 1995 through
the Date of Termination, $____________;
(c) with respect to all compensation previously
deferred by or for the Executive together with any
accrued earnings thereon under the Company's Excess
Benefit Retirement Plan and the Executive
Retirement Plan, $________ as of December 31, 1994,
not including additional amounts to be paid based
upon earnings and contributions that may accrue
subsequent thereto;
(d) with respect to all other payments and benefits
described in the Employment Agreement,
$_____________; provided, however, that, for three
years immediately following the Executive's
termination of employment, the Executive will also
be eligible to purchase from Union Pacific, at
Union Pacific's cost, medical coverage comparable
to that provided to active employees of Union
Pacific.
2. Separate Payment. In addition to the amounts specified in
paragraph 1, the Executive shall receive a separate payment
equal to the Extra Payment as defined in Section 5.4(a) of the
Agreement and Plan of Merger by and among Union Pacific
Corporation, UP Rail, Inc. and Chicago and North Western
Transportation Company dated as of March 16, 1995 ("Merger
Agreement") in the amount of $___________.
3. Release by Executive. In consideration of the foregoing,
effective on the Date of Termination:
(i) Executive voluntarily, knowingly, and willingly
releases and hereby discharges the Company and its
respective officers, directors, partners, shareholders,
employees and agents, and each of their predecessors,
successors and assigns, from any and all charges,
complaints, claims, promises, agreements, controversies,
causes of action and demands of any nature, known or
unknown, associated with Executive's employment with the
Company (including but not limited to claims under the
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Employment Agreement) which Executive or Executive's
executors, administrators, successors or assigns ever
had, now have or hereafter can, shall or may have by
reason of any matter, cause or things whatsoever arising
to the time Executive signs the Agreement, except (A) the
Executive does not hereby waive Executive's rights, if
any, to indemnification under Section 5.9 of the Merger
Agreement (but does waive any rights the Executive might
otherwise derive from Section 5.4 of the Merger
Agreement), (B) the Executive does not hereby waive or
release rights to any benefits vested and accrued prior
to the Date of Termination under any applicable plan of
the Company or its affiliates and the Executive is not
required to sign this Agreement in order to receive such
vested benefits, (C) the Executive does not hereby waive
or release rights to any rights to benefits under any
plans of the Company not specifically addressed elsewhere
herein under which he would be entitled to benefits in
the ordinary course pursuant to the terms of such plans
(including but not limited to the right to continued
medical coverage under COBRA) and (D) the Executive does
not hereby waive or release any rights with respect to
the Executive's stock options set forth under Section 2.3
of the Merger Agreement.
(ii) Executive hereby resigns all offices and titles
with the Company and its subsidiaries and affiliates.
(iii) Executive also releases, without limitation, any rights
or claims arising prior to the time Executive signs this
Agreement relating in any way to Executive's employment
relationship with the Company, or the termination thereof
(including, without limitation, any claim of wrongful
discharge or breach of express or implied employment
contract), and any rights or claims under any statute,
including the Federal Age Discrimination in Employment Act,
Title VII of the Civil Rights Act, the Americans with
Disabilities Act, Sections 503 and 504 of the Rehabilitation
Act of 1973, the Illinois Human Rights Act, the Municipal Code
of Chicago or any other federal, state or local law.
(iv) Executive represents that Executive has not filed any
lawsuits or administrative complaints asserting any claims
that are released in this paragraph 3. Executive further
agrees that Executive shall not be entitled to any recovery in
any proceeding against the Company or any of its subsidiaries
or successors asserting any claims that are released in this
paragraph 3 that are brought on his behalf.
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(v) The Executive understands and agrees that, except as
herein otherwise provided, the payments enumerated in this
Agreement are all that the Executive will receive from the
Company. The Executive will receive no further wage,
vacation, severance or, except as herein otherwise provided,
other payments from the Company. The payments enumerated in
this Agreement include consideration for the Executive signing
this Agreement and fulfilling the promises contained herein.
The parties agree that the payments enumerated in this
Agreement are in excess of any payments or benefits to which
the Executive may otherwise be entitled.
4. Stockholders Agreement. If a party thereto, Executive agrees
to amend (i) the Second Amended and Restated Stockholders
Agreement, dated as of March 30, 1992, as amended, (ii) an
agreement, dated as of June 21, 1993 among the parties to such
Stockholders Agreement, and (iii) the Registration Rights
Agreement, dated July 14, 1989, as amended (collectively, the
"Three Agreements"), to provide that they shall terminate upon
the "Effective Time" of the proposed merger between UP Rail,
Inc. and Chicago and North Western Transportation Company (as
"Effective Time" is defined in the Merger Agreement). Further
the Executive agrees to waive and release (effective as of the
Effective Time) any and all rights under each of the Three
Agreements to which the Executive is a party.
5. Cooperation. Executive agrees that, upon the request of the
Company, Executive will cooperate in good faith in any
litigation to which the Company is a party and as to which the
Executive has relevant information or materials.
6. Full Settlement. The Company's obligation to make the
payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any
circumstances, including, without limitation, set-off,
counterclaim, recoupment, defense or other claim, right or
action which the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation
of the amounts payable to the Executive under any of the
provisions of this Agreement, nor shall the amount of any
payment hereunder be reduced by any compensation earned by the
Executive as a result of employment by another employee.
7. Confidentiality. Executive agrees not to disclose in any
manner information about the Company or Union Pacific obtained
by Executive while employed by the Company, other than
information generally available to the public. Executive
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agrees to return immediately to the Company all written
material and other property containing such information, as
well as any other property belonging to the Company.
8. Tax Withholding. The Company's obligation to pay amounts
hereunder are subject to its withholding obligations under
applicable federal, state and local tax laws. The Executive
is responsible for any tax liability associated with payments
provided under this Agreement which under applicable law he is
obligated to pay.
9. Consideration Period. The Executive confirms that the
Executive has been given twenty-one (21) days to review and
consider this Agreement before signing it. The Executive
understands that Executive may use as much or as little of
this period as Executive wishes prior to signing.
10. Consultation with Attorney. The Executive is advised, at his
or her own expense, to consult with an attorney before signing
this Agreement.
11. Revocation Rights. The Executive may revoke this Agreement
within seven (7) business days of the date of the Employee's
signature. Revocation can be made by delivering a written
notice of revocation to Robert Schmiege at the Company. For
this revocation to be effective, written notice must be
received no later than close of business on the seventh (7th)
business day after the Executive signs this Agreement. If
Executive revokes this Agreement, it shall not be effective or
enforceable and Executive will not receive any payments or
benefits described in paragraph 2. If the Executive does not
revoke this Agreement, then, upon expiration of the revocation
period provided in this paragraph 11, this Agreement shall
immediately become irrevocable as to, and binding upon, the
Executive.
12. Binding Agreement. Unless revoked by the Executive during the
revocation period described in paragraph 11 hereon, this
Agreement shall be binding on and inure to the benefit of the
Company, its successors and assigns.
13. Miscellaneous.
(i) If all or any part of this Agreement is declared by any
court or governmental authority to be unlawful or invalid,
such unlawfulness or invalidity shall not serve to invalidate
any portion of this Agreement not declared to be unlawful or
invalid. Any paragraph or a part of a paragraph so declared
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to be unlawful or invalid shall, if possible, be construed in
a manner which will give effect to the terms of such paragraph
or part of a paragraph to the fullest extent possible while
remaining lawful and valid.
(ii) This Agreement shall not be altered, amended, or
modified except by written instrument executed by the Company
and the Executive. A waiver of any term, covenant, agreement
or condition contained in this Agreement shall not be deemed
a waiver of any other term, covenant, agreement or condition
and any waiver of any default in any such term, covenant,
agreement or condition shall not be deemed a waiver of any
later default thereof or of any other term, covenant,
agreement or condition.
(iii) This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original, but all of
which together will constitute one and the same instrument.
(iv) This Agreement forms the entire agreement between the
parties hereto with respect to any severance payment and with
respect to the subject matter contained in the Agreement.
This Agreement shall supersede all prior agreements, promises,
and representations regarding severance or other payments
contingent upon termination of employment, whether in writing
or otherwise.
(v) The captions of this Agreement are not part of the
provisions hereof and shall not have any force or effect.
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(vi) The provisions of this Agreement shall be interpreted
and construed in accordance with the laws of the State of
Illinois without regard to its choice of law principles.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the dates specified below.
Date: , 1995 ----------------------------
Executive
CHICAGO AND NORTH WESTERN
TRANSPORTATION COMPANY
Date: , 1995 By:----------------------------
Its:----------------------------
CHICAGO AND NORTH WESTERN
RAILWAY COMPANY
Date: , 1995 By:----------------------------
Its:----------------------------
UNION PACIFIC
RAILROAD COMPANY
Date: , 1995 By:----------------------------
Its:----------------------------
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EXHIBIT 99.38
EXPEDITED CONSIDERATION REQUESTED UP/CNW-134
BEFORE THE
INTERSTATE COMMERCE COMMISSION
Finance Docket No. 32133
UNION PACIFIC CORPORATION,
UNION PACIFIC RAILROAD COMPANY AND
MISSOURI PACIFIC RAILROAD COMPANY -- CONTROL --
CHICAGO AND NORTH WESTERN TRANSPORTATION COMPANY
AND CHICAGO AND NORTH WESTERN RAILWAY COMPANY
APPLICANTS' PETITION FOR DETERMINATION THAT
SECURITIES TERMS ARE JUST AND REASONABLE
The primary Applicants, Union Pacific Corporation ("UPC"),
Union Pacific Railroad Company ("UPRR"), Missouri Pacific Railroad
Company ("MPRR"),\1\ Chicago and North Western Transportation Company
("CNWT") and Chicago and North Western Railway Company ("CNW"),
hereby submit this petition for a determination that the terms of
the proposed merger of UP Rail, Inc. ("UP Rail"), an indirect
wholly-owned subsidiary of UPC, into CNWT are just and reasonable.
This petition is supported by the verified statement of J.
Tomilson Hill of The Blackstone Group, L.P., attached as Exhibit A
hereto, and by the Offer to Purchase dated March 23, 1995, which is
attached as Exhibit B hereto.
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\1\ UPRR and MPRR are referred to collectively as "UP." UPC and its
subsidiaries generally are referred to as "Union Pacific."
<PAGE>
BACKGROUND
----------
The Commission authorized common control of UP and CNW in
Decision No. 25 in this proceeding, served March 7, 1995. That
decision is scheduled to become effective on April 6, 1995. No
party sought a stay of the decision within the ten-day period
provided for in 49 C.F.R. Section 1115.3(f).
On March 7, 1995, following the issuance of Decision No. 25,
Union Pacific announced that it had decided to explore a variety of
options for the further coordination of UP and CNW, including a
possible acquisition.
Subsequently, there were discussions between the companies
concerning a possible acquisition, which proved fruitful, and on
March 10, 1995, Union Pacific and CNWT announced that they had
reached agreement in principle on an acquisition by Union Pacific
of all CNWT stock at a price of $35 per share. A copy of an SEC
Schedule 13D embodying this announcement was filed in this Docket
on the same day.
UPC, UP Rail, and CNWT entered into an Agreement and Plan of
Merger dated as of March 16, 1995 ("the Merger Agreement"). The
Merger Agreement was filed in this Docket on March 17, 1995. A
text of the Merger Agreement is Annex I to Exhibit B hereto.
The Merger Agreement provides that UP Rail will make a tender
offer for 100% of the common stock of CNWT at a price of $35 per
share ("the Tender Offer"). Consummation of the Tender Offer is
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<PAGE>
subject to various conditions, including (a) that the shares
tendered, together with the CNWT stock already owned by UP Rail and
UPC, constitute a majority of the CNWT stock, and (b) that Decision
No. 25 has become final and effective. Following consummation of
the Tender Offer, UP Rail is to be merged into CNWT, in a
transaction ("the Merger") in which all remaining (i.e., non-
tendering) shareholders of CNWT will receive $35 per share in cash
- -- the same price paid to tendering shareholders in the Tender
Offer.
The Tender Offer was commenced on March 23, 1995, and is
scheduled to expire on April 19, 1995. A copy of the Offer to
Purchase (Exhibit B hereto) was previously filed in this Docket on
March 24, 1995.
On March 10 and 13, 1995, several purported class action
lawsuits were filed on behalf of CNWT shareholders against CNWT,
CNWT's directors, UPC and certain other parties in the Delaware
Court of Chancery. An amended complaint was filed on March 28.
The amended complaint contends, among other things, that the
purchase price for CNWT's stock was inadequate, that CNWT's direc-
tors breached their fiduciary duties in entering into the Merger
Agreement, and that the Tender Offer materials fail to disclose
certain alleged facts which plaintiffs contend are material.
Applicants believe that these suits are entirely without merit, and
intend to seek their dismissal on the ground that they infringe
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<PAGE>
upon the Commission's exclusive jurisdiction over railroad control
transactions.
THIS PETITION
-------------
By this petition, the primary Applicants are requesting that
the Commission determine that the $35-per-share price to be paid to
CNWT shareholders in the Merger is just and reasonable. Because
effectuation of the Merger is an important step in fully realizing
the substantial competitive and efficiency benefits of the
integration of the UP and CNW railroads, Applicants are requesting
that the Commission give this petition expedited consideration
under the modified procedure (49 C.F.R. pt. 1112). A suggested
procedural schedule is set forth at pages 14-16 below.
The Commission's authority -- and indeed obligation -- to
determine whether the securities terms of a railroad control
transaction are just and reasonable is well-established. The U.S.
Supreme Court held in Schwabacher v. United States, 334 U.S. 182,
197-99 (1948), that the Commission must decide the fairness of the
securities terms of a control transaction that falls within its
jurisdiction.\2\ Any other remedies to which securityholders might
- ------------------
\2\ See also, e.g., Finance Docket No. 31035, Merger -- Baltimore &
Ohio R.R. & Chesapeake & Ohio Ry., ("B&O/C&O"), Decision served
Mar. 2, 1988, p.3 ("where the Commission exercises its
jurisdiction to approve and authorize a railroad merger,
pursuant to sections 11343-11348, it has an obligation to pass
upon all aspects of the transaction relating to capital
liabilities"). Since the enactment of the Staggers Act, this
requirement has applied only to
(continued...)
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<PAGE>
otherwise have been entitled, such as state-law appraisal rights,
are pre-empted pursuant to 49 U.S.C. Section 11341(a). Id. at 201;
Norfolk & Western Ry. v. ATDA, 499 U.S. 117, 130-31 (1991).\3\
The Schwabacher Court noted that the Commission's focus, in
determining whether the securities terms of a control transaction
are just and reasonable, is "to see that minority interests are
protected." 334 U.S. at 201. The Commission has often made this
same point. See, e.g., Union Pacific Corp., Pacific Rail System,
Inc., & Union Pacific R.R. -- Control -- Missouri Pacific Corp. &
Missouri Pacific R.R. ("UP/MP/WP"), 366 I.C.C. 462, 635 (1982),
aff'd in relevant part sub nom. Southern Pacific Transportation Co.
v. ICC, 736 F.2d 708, 725-27 (D.C Cir. 1984), cert. denied, 469
U.S. 1208 (1985) ("In appraising any transaction affecting the
rights of stockholders, it is incumbent upon us to see that the
interests of the minority stockholders are protected and that the
overall proposal is just and reasonable to those
- ------------------
\2\ (...continued)
transactions that, as here, involve two or more Class I
carriers. See Norfolk & Western Ry. -- Purchase -- Illinois
Terminal R.R., 363 I.C.C. 882, 890-92 (1981).
\3\ See also, e.g., Bruno v. Western Pacific R.R., 498 A. 2d 171
(Del. Ch. 1985), aff'd mem., 508 A.2d 72 (Del. 1986), cert.
denied, 482 U.S. 927 (1987); Altman v. Central of Georgia Ry.,
488 F.2d 1302 (D.C. Cir. 1973); Suffin v. Pennsylvania R.R., 276
F. Supp. 549 (D. Del. 1967), aff'd, 396 F.2d 75 (3d Cir. 1968),
cert. denied, 393 U.S. 1062 (1969); Manufacturers Life Insurance
Co. v. Missouri Pacific R.R., Civ. No. 91-126-SLR, 1992 U.S.
Dist. LEXIS 19612 (D. Del. Dec. 10, 1992).
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<PAGE>
stockholders . . . ."); Union Pacific Corp., Union Pacific R.R. &
Missouri Pacific R.R. -- Control -- Missouri-Kansas-Texas R.R.
("UP/MKT"), 4 I.C.C.2d 409, 515-16 (1988), petition for review dis-
missed sub nom. RLEA v. ICC, 883 F.2d 1079 (D.C. Cir. 1989);
Missouri Pacific R.R. -- Merger -- Missouri Pacific R.R. ("MP
Merger"), 360 I.C.C. 6, 16 (1978).
It has also repeatedly been emphasized that Schwabacher stands
for the proposition that the mere fact that minority shareholders
"hold out," and do not follow the majority in tendering or
exchanging their shares, does not entitle them to any premium.
E.g., MP Merger, 360 I.C.C. at 30; Fried v. United States, 212 F.
Supp. 886, 890 (S.D.N.Y. 1962) (three-judge court), aff'g Erie R.R.
Merger, Delaware, Lackawanna & Western R.R. ("Erie Lackawanna"),
312 I.C.C. 185 (1960), Stott v. United States, 166 F. Supp. 851,
859 (S.D.N.Y. 1958) (three-judge court), aff'g Louisville &
Nashville R.R. Merger ("L&N"), 295 I.C.C. 457 (1957).
Generally, the Commission has addressed the issue of whether
the securities terms of a merger or other control transaction are
just and reasonable at the same time as it has determined whether
the transaction itself is in the public interest. E.g., UP/MP/WP;
UP/MKT; MP Merger. Here, the control issue was presented and
decided before it was known whether there would be any further
acquisition of CNWT securities by Union Pacific, or what the terms
of such a securities acquisition would be. But this sequence of
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<PAGE>
events does not diminish the Commission's authority to make a just
and reasonable determination at this time through a supplemental
decision in this proceeding.\4\ Indeed, exactly such a procedure was
contemplated in the original control application. See UP/CNW-6,
Jan. 29, 1993, p. 14, noted in Decision No. 5, served Feb. 26,
1993, p. 4, 58 Fed. Reg. 11626, 11627 (1993).
Applicants are requesting a just and reasonable determination
by the Commission, rather than attempting to carry out the Merger
through an exemption. Applicants are clearly entitled to obtain a
just and reasonable determination on the merits. \5\ The Commission
- -----------------
\4\ Cf., e.g., Suffin, supra, 276 F. Supp. at 553 (Commission had
exclusive authority to determine whether the terms of an exchange
of securities undertaken to satisfy a condition to an
ICC-approved merger were just and reasonable).
\5\ It is clear that Applicants are entitled to continue to proceed
under the regulatory provisions of the Act, rather than by way
of an exemption. See Decision No. 25, p. 63 (rejecting SP's
argument that Applicants in the UP/CNW control case should have
been granted an exemption for coordinations that would give UP
control over CNW; "Applicants are entitled to have our decision
made in the formal application context"); cf. Ex Parte No. 282
(Sub-No. 18), Railroad Consolidation Procedures: Class Exemption
for Transactions Within a Corporate Family ("Rulemaking"),
Decision served Aug. 6, 1992, p. 5 ("The partial revocation
remedy, enabling a bypass of the class exemption procedure in
favor of the Sections 11344-11345 application process, would
remain available."); Finance Docket No. 31387, Canadian National
Ry. -- Partial Revocation of Class Exemption -- Lease From Grand
Trunk Western R.R., Decision served Jan. 27, 1989, pp.1-2
(partially revoking corporate family class exemption to
guarantee applicability of Section 11341 (a) pre-emption); Union
Pacific R.R. & Missouri Pacific R.R. -- Trackage Rights Over
Lines of Chicago & North Western Transportaion Co. Between
Fremont, NE/Council Bluffs, IA &
(continued...)
-7-
<PAGE>
has extensive experience in determining whether the securities
terms of Class I railroad control transactions are just and
reasonable, and is the appropriate forum for resolving such issues.
Moreover, for the Commission to determine the matter will have the
benefit of providing certainty as to the pre-emption of state-law
- -------------------
\5\ (...continued)
Chicago, IL 7 I.C.C. 2d 177, 180-181 (1990). These more recent
decisions can only be understood, in Applicants' view, to
supersede the 1981 decision in Finance Docket No. 29757,
Colorado & Southern Ry. -- Merger Into Burlington Northern R.R.
-- Exemption & Request for Determination of Fairness ("Colorado
& Southern"), Decision served Dec. 31, 1981, in which the
Commission declined a request that it partially revoke the
corporate family class exemption to the extent necessary to make
a just and reasonable determination. Colorado & Southern is in
any event fundamentally different from this case, since there
the applicants wished to carry out the transaction on an exempt
basis, whereas here there has already been a full-scale control
proceeding on the merits. See id., p. 5 (finding it
inappropriate that the Commission should "determine a
substantive issue in a proceeding and at the same time exempt it
from review"); see also B&O/C&O, supra, p. 4 (streesing that in
Colorado & Southern, the Commission had "found it unnecessary to
review and approve a railroad merger").
-8-
<PAGE>
remedies.\6\ In addition, Applicants believe it is clear that the
Merger does not qualify for an exemption.\7\
- ----------------
\6\ As already noted (p. 5 & n.3 supra), all state-law and other
remedies are pre-empted when the Commission exercises its
control authority under 49 U.S.C. Section 11343, et seq. On the
other hand, it is less clear whether there is a pre-emption when
a control transaction takes place pursuant to a Section 10505
exemption. In two decisions, the Commission has held that when
a merger is carried out pursuant to the corporate-family class
exemption, there is no Section 11341(a) pre-emption, and
minority shareholders can therefore invoke state-law appraisal
remedies. Colorado & Southern, supra; B&O/C&O, supra. See
also, e.g., Railroad Consolidation Procedures -- Trackage
Rights Exemption, 1 I.C.C.2d 270, 279 (1985) (no Section
11341(a) pre-emption for consolidation transactions exempted
under Section 10505). But more recent Commission authority
rejects the rationale of these decisions, and holds that
control transactions exempted under Section 10505 do give rise
to Section 11341(a) pre-emption. The latest such holding is in
Decision No. 25 in this proceeding, at pp. 63-64, where the
Commission stated that it disagreed "with SP's argument that
the section 11341(a) immunity provision would not apply in the
section 10505 exemption context. The literal terms of the
section 11341(a) immunity provision indicate that it is
applicable to any transaction 'approved or exempted by the
Commission under this subchapter' (i.e., under subchapter III
of Chapter 113 of Subtitle IV of Title 49, United States Code).
The Commission, however, 'has consistently taken the position
that [the section 11341(a) immunity provision] applies to
authorizations by exemption [under section 10505] as well as
to approvals.' Delaware and Hudson Railway Co. -- Lease and
Trackage Rights -- Springfield Terminal Ry. Company, Finance
Docket No. 30965 (Sub-Nos. 1 and 2) (ICC served Apr. 21, 1993)
(at 2 n.4)."
(Bracketed material in original.) See also, e.g., Finance
Docket No. 30965 (Sub-Nos. 1 & 2), Delaware & Hudson Ry. --
Lease & Trackage Rights Exemption -- Springfield Terminal Ry.,
Decision served Mar. 16, 1992, p. 6.
\7\ The Merger does not fall within the class exemption for control
transactions within a corporate family (49 C.F.R. Section 1180.2(d)(3))
because it is not distinct from the
(continued...)
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<PAGE>
THE BASIS FOR A JUST AND REASONABLE DETERMINATION
-------------------------------------------------
The facts overwhelmingly support a determination that the $35-
per-share purchase price for CNWT stock is just and reasonable. Those
facts are set forth at length in the Offer to Purchase and the
verified statement of Mr. Hill. Briefly, the following are among the
key considerations:
o CNWT shareholders will receive a large premium over the
market price of their stock prior to the announcement of the
purchase terms. The price of $35 per share represents a 34%
premium over the market price of $26.125 on March 9, 1995, the last
full day of trading before the $35-per-share price was announced;
a 41% premium over the market price of $24.875 on March 6, 1995,
the last full day of trading before Decision No. 25 was issued and
Union Pacific announced that it was considering various possible
steps including an acquisition of CNWT; and a 49% premium over the
average CNWT share price during the thirty days ending on March 9,
- ----------------
\7\ (...continued)
acquisition of CNWT through the Tender Offer. See Finance
Docket No. 30765, Missouri Pacific R.R. -- Control &
Consolidation Exemption -- Jefferson Southwestern R.R.,
Decision served Mar. 19, 1986, p. 1 (consolidation must be
"distinct from the acquisition of exclusive control" in order
to be "considered a transaction within a corporate family");
Rulemaking, p. 5 & n.14 (same). Nor does the Merger qualify
for a transaction-specific exemption under Section 10505; a
just and reasonable determination has always been a normal --
and required -- component of every control transaction
involving Class I railroads, and the exercise of the
Commission's regulatory authority cannot have been rendered
unnecessary simply because the sequence of events has been
different here.
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<PAGE>
1995. Offer to Purchase, p. 43; Hill V.S., p. 8. Payment of a
premium price has been found to be compelling evidence that
securities terms are just and reasonable. See, e.g., UP/MP/WP, 365
IC.C. at 637; UP/MKT, 4 I.C.C.2d at 516.
o The acquisition price and the various other terms of the
Merger Agreement were negotiated at arm's-length between
independent parties. The members of CNWT's board of directors
unanimously approved the acquisition terms (with Richard K.
Davidson, President of UPC, not participating). The CNWT board
members (Mr. Davidson excepted) have no affiliation with Union
Pacific. The arm's-length negotiations between CNWT and Union
Pacific led Union Pacific to increase its proposed purchase price
twice. See Offer to Purchase, pp. 5-6. Such arm's-length
negotiations have many times been held to be crucial evidence that
securities terms are just and reasonable. See, e.g., UP/MP/WP, 366
I.C.C. at 638; Norfolk Southern Corp. -- Control -- Norfolk &
Western Ry. & Southern Ry. ("NS"), 366 I.C.C. 171, 232 (1982); CSX
Corp. -- Control -- Chessie System, Inc. & Seaboard Coast Line
Industries, Inc. ("CSX"), 363 I.C.C. 518, 594 (1980), aff'd sub
nom. Brotherhood of Maintenance of Way Employees v. ICC, 698 F.2d
315 (7th Cir. 1983); Newrail Co. -- Purchase -- Western Pacific
R.R. ("Newrail"), 354 I.C.C. 885, 899-901 (1979); Great Northern
Pacific & Burlington Lines, Inc. -- Merger -- Great Northern Ry.,
331 I.C.C. 228, 260 (1967), aff'd sub nom. United States v. United
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<PAGE>
States, 296 F. Supp. 853, 872 (D.D.C. 1968) (three-judge court),
aff'd sub nom. United States v. ICC, 396 U.S. 491, 516-22 (1970);
Seaboard Air Line R.R. -- Merger -- Atlantic Coast Line R.R.
("Seaboard Coast Line"), 320 I.C.C. 122, 192 (1963), aff'd sub nom.
Florida East Coast Ry. v. United States, 259 F. Supp. 993 (M.D.
Fla. 1966) (three-judge court), aff'd mem., 386 U.S. 544 (1967);
Erie Lackawanna, 312 I.C.C. at 188.
o The CNWT board received the advice of, and a written
fairness opinion from, The Blackstone Group ("Blackstone"). See
Offer to Purchase, pp. 5-14. Blackstone is an investment banking
firm with extensive expertise in the area of railroad securities
and an in-depth knowledge of CNWT's operations based on, among
other things, the participation of Blackstone's affiliate,
Blackstone Capital Partners L.P., in the leveraged buyout of CNWT
in 1989. See Hill V.S., pp. 1-2. Blackstone's formal written
opinion as to the fairness of the acquisition terms to CNWT
shareholders is attached to Mr. Hill's verified statement.\8\ The
analyses and fairness opinions of financial experts of this kind
have repeatedly been cited by the Commission as an important factor
in concluding that the securities terms of a transaction are just
and reasonable. See, e.g., UP/MKT, 4 I.C.C.2d at 515-16; UP/MP/WP,
- ----------------
\8\ Union Pacific, for its part, was advised by CS First Boston, an
investment banking firm with similar expertise, which provided
an opinion that the terms of the acquisition are fair to UPC
shareholders. See Offer to Purchase, pp. 7, 14- 16.
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<PAGE>
366 I.C.C. at 633-34; NS, 366 I.C.C. at 232; CSX, 363 I.C.C. at
595; Newrail, 354 I.C.C. at 901; Illinois Central Gulf R.R. --
Acquisition -- Gulf, Mobile & Ohio R.R., Illinois Central R.R.
("ICG"), 338 I.C.C. 805, 816 (1971), aff'd sub nom. Missouri
Pacific R.R. v. United States, 346 F. Supp. 1193 (E.D. Mo. 1972)
(three-judge court), & sub nom. Kansas City Southern Ry. v. United
States, 346 F. Supp. 1211 (W.D. Mo. 1972) (three-judge court),
aff'd mem., 409 U.S. 1094 (1973); Seaboard Coast Line 320 I.C.C. at
192; Norfolk & Western Ry. Merger, Virginian Ry., 307 I.C.C. 401,
429 (1959).
o As Mr. Hill explains in his verified statement, Blackstone
considered, in arriving at the conclusion that the purchase price
for the CNWT stock was fair to CNWT shareholders, a range of
pertinent factors,\9\ including: CNWT's likely earnings power, as
reflected in historical earnings and projected future earnings;
recent market prices and price/earnings ratios for CNWT stock, and
for the stock of comparable companies; the potential synergies of
a UP/CNW combination; the terms of comparable transactions; and the
risks and uncertainties associated with alternative possible
transactions.\10\ The Commission has found in many past cases that
- ----------------
\9\ CS First Boston considered similar factors in advising Union
Pacific that the acquisition terms were fair to UPC
shareholders. See Offer to Purchaser, pp. 14-16.
\10\ Specifically, Blackstone concluded that, given Union Pacific's
already-existing ownership interest in CNWT, the
(continued...)
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<PAGE>
it is proper to analyze just such factors in order to arrive at a
conclusion that the securities terms of a transaction are just and
reasonable. See, e.g., UP/MKT, 4 I.C.C.2d at 515-16; Chicago,
Milwaukee, St. Paul & Pacific R.R. -- Reorganization -- Acquisition
By Grand Trunk Corp., 2 I.C.C.2d 161, 218 (1984); UP/MP/WP, 366
I.C.C. at 633-38; MP Merger, 360 I.C.C. at 16-18; Newrail, 354
I.C.C. at 901; ICG, 338 I.C.C. at 816-17; Erie Lackawanna, 312
I.C.C. at 188, 236; L&N, 295 I.C.C. at 493-500.
In sum, Applicants submit that the detailed discussion of
fairness issues in the Offer to Purchase (pp. 5-14), together with
the verified statement of Blackstone's Mr. Hill, amply support a
finding that the $35 per share purchase price for CNWT is just and
reasonable.
SUGGESTED PROCEDURAL SCHEDULE
Applicants would suggest that the Commission employ the
modified procedure (49 C.F.R. pt. 1112) for this follow-on
proceeding. The modified procedure has been used in similar
proceedings, and its use has been upheld by the courts. See,
- ----------------
\10\ (...continued)
close traffic and financial relationships between the
companies, the Commission's March 7, 1995 issuance of Decision
No. 25, and the need for other rail acquirers to obtain
control authority from the Commission, "viable competition to
acquire [CNWT] was unlikely to emerge." Offer to Purchase, p.
12. In fact, no other bidders have emerged since the proposed
acquisition was announced on March 10, 1995. See id., p. 8.
-14-
<PAGE>
e.g., Finance Docket No. 29594, Kansas City Southern Ry. --
Stock, Decision served Feb. 8, 1982, p. 1, aff'd sub nom. Laird
v. ICC, 691 F.2d 147, 154-55 (3d Cir. 1982), cert. denied, 461
U.S. 927 (1983).
Applicants would suggest that a notice of this proceeding be
published in the Federal Register. Federal Register publication
is the standard means by which public notice is normally given of
all aspects of proposed Class I railroad control transactions,
and it is clear that such publication provides notice to all
interested persons as a matter of law. See, e.g., Friends of
Sierra R.R. v. ICC, 881 F.2d 663, 667-68 (9th Cir. 1989), cert.
denied, 493 U.S. 1093 (1990); Finance Docket No. 31058, Mendocino
Coast Ry. -- Acquisition Exemption -- Assets of California
Western R.R., Decision served Dec. 28, 1987, p. 5. Applicants
are also serving a copy of this petition on all active parties in
this proceeding and on counsel for the plaintiffs in the Delaware
shareholder suits, and will serve a copy on any known CNWT
shareholders who do not tender their shares in the Tender Offer.
The Federal Register notice would provide a summary of this
petition, advise interested persons that they could obtain a copy
of the full petition from Applicants' attorneys, and set forth a
schedule for written submissions. The following schedule appears
appropriate:
30 days from Federal Submission of
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<PAGE>
Register publication written comments by any interested
person
45 days from Federal Submission of
Register publication reply by Applicants (or such earlier
date as they may submit them)
The matter could then be decided promptly thereafter.
Applicants doubt that there will be any need or
justification for appreciable discovery. If interested parties
do appear and seek discovery, Applicants will respond
expeditiously, attempt to resolve any disputes informally, and
present to the Commission for prompt decision any disputes that
cannot be resolved informally.
Expedited handling of this matter is in keeping with the
Commission's new six-month procedural schedule for resolving all
issues (including, among many others, securities fairness) in the
BN/Santa Fe proceeding. Moreover, the need for expedition in
this matter is apparent. The Merger is an important step in
achieving the complete integration of the UP and CNW railroads,
and the attendant enhancement of competition and reduction in
costs and overheads. Based on a very full record built over a
two-year period, which included extensive evidence concerning the
benefits of a full integration of the railroads,\11\ the
Commission has found that the common control of these railroads
is clearly in the public interest. The present matter should be
- ----------------
\11\ See UP/CNW-127, pp. 62-66 (collecting record citations).
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<PAGE>
brought to a conclusion expeditiously so that there will be no
unnecessary delay in achieving the major public benefits of a
UP/CNW combination.
Respectfully submitted,
RONALD J. CUCHNA CARL W. VON BERNUTH
STUART F. GASSNER RICHARD J. RESSLER
Chicago and North Western Union Pacific Corporation
Transportation Company Martin Tower
One North Western Center Eighth and Eaton Avenues
Chicago, Illinois 60606 Bethlehem, Pennsylvania 18018
(312) 559-7000 (610) 861-3290
/s/ L. John Osborn AR JAMES V. DOLAN
L. JOHN OSBORN PAUL A. CONLEY, JR.
Suite 600, East Tower LOUISE A. RINN
1301 K Street, N.W. Law Department
Washington, D.C. 20005 Union Pacific Railroad Company
(202) 408-6351 Missouri Pacific Railroad
Company
Attorneys for Chicago and 1416 Dodge Street
North Western Transpor- Omaha, Nebraska 68179
tation Company and (402) 271-5000
Chicago and North Western
Railway Company
/s/ Arvid E. Roach
ARVID E. ROACH II
Covington & Burling
1201 Pennsylvania Avenue, N.W.
P.O. Box 7566
Washington, D.C. 20044-7566
(202) 662-5388
Attorneys for Union Pacific
Corporation, Union Pacific
Railroad Company and
Missouri Pacific Railroad
Company
April 4, 1995
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<PAGE>
CERTIFICATE OF SERVICE
I, Michael L. Rosenthal, certify that on this 4th day of
April, 1995, I caused a copy of the foregoing document to be
served by first-class mail on all parties of record or their
counsel, and on counsel for the plaintiffs in the shareholder
suits filed in the Court of Chancery of the State of Delaware, as
follows:
Joseph A. Rosenthal, Esq.
Rosenthal, Monhait, Gross & Goddess
P.O. Box 1070
Wilmington, Delaware 19899
(Counsel for Plaintiffs in Feiwel v. Martin,
Civil Action No. 14109; Steiner v. Davidson,
Civil Action No. 14111; Katz v. Martin, Civil
Action No. 14112; Gerber v. Martin, Civil
Action No. 14117)
Karen Morris, Esq.
Morris & Morris
Suite 1600
1105 North Market Street
Wilmington, Delaware 19801
(Counsel for Plaintiff in Kowal v. Chicago &
Northwestern Transportation Company, Civil
Action No. 14115)
/s/ Michael L. Rosenthal
Michael L. Rosentha
<PAGE>
VERIFIED STATEMENT OF J. TOMILSON HILL
My name is J. Tomilson Hill. I am a General Partner of
Blackstone Group Holdings, L.P. ("BGH"), an affiliate of The
Blackstone Group L.P. ("Blackstone"). I joined Blackstone in
1994. I have more than 20 years of experience in investment
banking, starting my career at The First Boston Corporation in
1973. I was co-founder of the Mergers and Acquisitions
Department of First Boston and was later head of the mergers
Department at Smith Barney. I joined Lehman Brothers as a
partner in 1982, serving as co-head and later head of Mergers and
Acquisitions, and then as co-head and head of Investment Banking.
I became Co-Chief Executive Officer of Lehman Brothers in 1990
and in early 1993 became Co-President and Co-COO of Shearson
Lehman Brothers Holdings Inc. I am a graduate of Harvard College
(1970) and the Harvard Business School (1973). I was the lead
Blackstone person advising Chicago and North Western
Transportation Company ("CNW") in the matter discussed below.
Blackstone is a private investment banking firm that was
founded in 1985 by Mr. Peter G. Peterson, Chairman, and Mr.
Stephen A. Schwarzman, President and Chief Executive Officer.
Blackstone is engaged in providing an array of financial advisory
services to major corporate clients with respect to mergers and
acquisitions, financing transactions and strategic matters.
<PAGE>
Since its founding, Blackstone has advised on transactions with a
value of in excess of $100 billion.
Blackstone Capital Partners L.P., an affiliate of
Blackstone, led a leveraged, going-private transaction of CNW
Corporation, a predecessor of CNW, in 1989, and Blackstone has
since that time performed various financial advisory services for
CNW.
Pursuant to a letter agreement dated December 14, 1994, CNW
and Blackstone confirmed that Blackstone had been retained,
effective November 29, 1994, to act as CNW's exclusive financial
advisor with respect to various matters, including certain
matters affecting CNW arising out of Union Pacific Corporation's
("Union Pacific") then proposed acquisition of Santa Fe Pacific
Corporation and an evaluation of strategic alternatives to
maximize the long-term shareholder value for CNW.
Pursuant to a letter agreement dated March 3, 1995, which
was entered into in addition to the December 14, 1994 letter
agreement, CNW and Blackstone confirmed that Blackstone had been
retained to act as CNW's exclusive financial advisor with respect
to a potential sale of, investment in, recapitalization by,
strategic alliance with or joint venture involving CNW.
On March 7, 1995, after the Interstate Commerce Commission
(the "ICC") issued a written opinion approving Union Pacific's
control of CNW, Union Pacific initiated discussions with CNW
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<PAGE>
concerning, among other things, the possibility of exploring the
acquisition by Union Pacific of CNW. Union Pacific indicated
that it would be prepared to explore an acquisition of CNW at a
price in the lower $30 per Share range.
On March 9, 1995, a special meeting of the CNW Board of
Directors (with Mr. Davidson absent due to his status as
President of Union Pacific) was held to consider the possibility
of a transaction whereby CNW would be acquired by Union Pacific.
I was present at that meeting, and on behalf of Blackstone,
presented certain materials to the Board presenting a range of
values for CNW Shares of Common Stock, par value $0.01 (the
"Shares"), using several different analyses and methodologies.
After considering various factors, including the advice of
Blackstone, it was the consensus of the CNW Board of Directors
that management of CNW enter into negotiations with Union Pacific
only if Union Pacific were to make an offer which exceeded the
lower $30 per Share range.
During a recess in the meeting, Drew Lewis, Chairman and
Chief Executive Officer of Union Pacific, contacted Robert
Schmiege, Chairman, President and Chief Executive Officer of CNW,
and indicated that Union Pacific was prepared to pursue
discussions with CNW concerning a possible transaction at a price
of $34 per Share.
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The CNW Board reconvened to consider the interest expressed
by Union Pacific, and the Board, again with the advice of
Blackstone and others, determined that although the Board might
be willing to pursue a transaction at $34 per Share, Mr. Schmiege
should attempt to increase the per Share consideration. During
another recess in the meeting, Mr. Schmiege advised Mr. Lewis
that the CNW Board was prepared to negotiate a transaction for
the sale of CNW, and after further discussion, the two men
reached an understanding for a transaction in which Union Pacific
would acquire 100% of CNW Shares at a price of $35 per Share,
subject to certain conditions, such as the approval of CNW's
Board of Directors.
The CNW Board reconvened, and Blackstone rendered an oral
opinion that the cash consideration of $35 per Share of CNW stock
was fair to the holders of CNW Shares from a financial point of
view. The Board, after considering various factors, including
the fairness opinion of Blackstone, approved a transaction in
which Union Pacific would acquire 100% of the CNW Shares for $35
per Share in cash, subject to the negotiation and execution of a
definitive merger agreement. On March 10, Union Pacific and CNW
issued a joint press release regarding their discussions.
The CNW Board of Directors requested Blackstone's written
opinion with respect to the fairness from a financial point of
view to the holders of Shares of CNW of the cash consideration to
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be received by such holders pursuant to the Agreement and Plan of
Merger dated as of March 16, 1995 (the "Merger Agreement"), among
CNW, Union Pacific, and UP Rail, Inc. ("UP Rail"), an indirect
wholly owned subsidiary of Union Pacific.
The Merger Agreement provides, among other things, that UP
Rail will make a cash tender offer for all Shares of CNW at
$35.00 per Share (the "Offer"), and that following consummation
of the Offer, UP Rail will merge with CNW in a transaction (the
"Merger") in which all outstanding Shares of CNW, other than
Shares held by Union Pacific and its subsidiaries, will be
converted into the right to receive $35.00 per Share in cash.
At a meeting of the CNW Board of Directors (with Mr.
Davidson absent due to his status as President of Union Pacific)
on March 16, 1995, in which I participated, Blackstone reviewed
for the Board the materials that it had presented at the March 9,
1995 meeting, confirmed that the materials should be considered
final, and delivered a written fairness opinion to the CNW Board
of Directors. A copy of this opinion, setting forth the
assumptions made and matters considered and limitations is
attached to this statement. The Merger Agreement was executed in
the evening of March 16, 1995.
Analyses Conducted
Blackstone reviewed certain publicly available information
relating to the business, financial condition and operations of
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CNW, and certain financial and other information, including
financial forecasts, furnished to Blackstone by CNW that is not
publicly available. Blackstone met with certain senior officers
of CNW to discuss the operations, financial condition, history
and prospects of CNW's businesses. In conducting this analysis,
Blackstone considered the terms of the Merger Agreement; stock
price data, the historical and current financial position and the
historical and projected cash flows and results of operations of
CNW; historical financial information and stock price data with
respect to certain public companies with operations that
Blackstone considered comparable to those of CNW; and prices paid
in certain other business combinations involving companies with
operations that Blackstone considered comparable to those of CNW.
In reviewing valuations of the Shares, Blackstone utilized
the operating projections outlined in CNW's 5-Year Business Plan
(the "Business Plan"). Blackstone compared these projections
with CNW's past performance. Blackstone reviewed CNW's stock
price since the company's initial public offering in April, 1992.
In performing the analyses described below, CNW's 1994 operating
results were adjusted to eliminate the effects of certain non-
recurring charges. References to the "current" stock price
included in the following refer to the Share price immediately
prior to the meeting of CNW's board of directors of March 9,
1995.
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Trading Comparables Valuation
Blackstone reviewed the multiples of earnings at which the
shares of the following comparable public companies trade:
Burlington Northern Inc., Conrail, Inc., CSX Corporation,
Illinois Central Corporation, Norfolk Southern Corporation, Union
Pacific and Wisconsin Central Transportation Corp. Based on the
trading multiples of operating results for the trailing twelve
months of such companies, Blackstone applied benchmark multiples
of 6.5x-7.5x to CNW's 1994 earnings before interest, taxes,
depreciation and amortization ("EBITDA") and 8.5x-10.0x to CNW's
1994 earnings before interest and taxes ("EBIT") to arrive at a
range of implied per Share values of $21.31-$28.12 and $19.61-
$27.13, respectively. Blackstone also applied benchmark
multiples of 1994 earnings per Share and estimated 1995 earnings
per Share of 12.5x-13.0x and 10.5x-11.0x, respectively, to arrive
at a range of implied per Share values of $24.13-$25.09 and
$26.25-$27.50, respectively. These analyses indicated a range of
implied value of $23.00 to $27.00 per Share.
Precedent Transactions Valuation
Blackstone reviewed the multiples of earnings paid by
acquirors in recent transactions in the railroad industry, but
noted that such comparisons had to be qualified by certain
factors. In the proposed acquisition of Santa Fe Pacific
Corporation by Burlington Northern Inc., the price was
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substantially higher than the original offer due to the highly
competitive bidding which occurred between Union Pacific and
Burlington Northern Inc. The proposed Illinois Central
Corporation transaction with Kansas City Southern Industries,
Inc., which was terminated, involved an auction with a number of
interested parties. In the Kansas City Southern Industries,
Inc./Midsouth Corporation transaction, Midsouth offered routes
that were attractive for a number of parties, and its small size
enabled financial buyers to compete in the bidding. In the
leveraged acquisition of CNW's predecessor by a Blackstone
affiliate, the transaction was consummated in light of a
competing hostile offer and at a time of significant liquidity in
the financing markets.
Blackstone also noted that, based on a preliminary review
with CNW's management of other potential strategic buyers, viable
competition to acquire CNW was unlikely to emerge. This view was
based upon Union Pacific's existing ownership stake in CNW, the
significant business relationships between Union Pacific and CNW,
and the ICC's March 7, 1995 approval of the joint application by
Union Pacific and CNW to permit the common control of CNW and
Union Pacific (the "Control Application"), which would likely
strengthen Union Pacific's position relative to other potential
railroad industry bidders since the acquisition of CNW by any
other railroad would be subject to future ICC approval.
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Blackstone further noted that in the last major railroad
transaction involving a large existing shareholder, Canadian
Pacific Ltd.'s acquisition of the remaining 44% of Soo Line
Railroad Company ("Soo"), the original offer was at an
approximately 8% premium to Soo's stock price, which was
subsequently increased to a 19% premium. With the foregoing
qualifications, based on such acquisitions in the railroad
industry, Blackstone estimated a range of implied per Share
values of (i) $28.12-$38.35 based on multiples of EBITDA of 7.5x-
9.0x, (ii) $32.15-$39.67 based on multiples of EBIT of 11.0x-
12.5x, and (iii) $28.95-$38.60 based on multiples of net income
of 15.0x-20.0x. These were calculated by applying the benchmark
multiples to CNW's 1994 operating results.
On March 7, 1995, Union Pacific filed an amendment to its
Schedule 13D with the Securities and Exchange Commission
disclosing the receipt of the ICC's approval of the Control
Application. Prior to such date, the per Share price was 24-7/8.
Hence, the Union Pacific offer of $35.00 per Share represents a
41% premium over such price. On March 10, 1995, CNW and Union
Pacific issued a press release announcing that Union Pacific had
agreed to acquire CNW, subject to certain conditions. The $35.00
per Share price represents a 49% premium over the average per
Share price for the 30-day period preceding this press release.
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Discounted Value of Future Stand-Alone Earnings Per Share
The projections of earnings per Share in CNW's Business Plan
were $2.50 in 1995, $3.01 in 1996, $3.82 in 1997, $4.63 in 1998
and $5.60 in 1999. Based on these projections, Blackstone
estimated a matrix of per Share values by discounting potential
future Share prices of CNW. These were estimated assuming a
range of future price/earnings multiples of 9.0x-12.0x and equity
discount rates of 13%-17%. Based on projected earnings per Share
for 1997, this analysis indicated a low per Share value of
$25.12, assuming the lowest multiple and highest discount rate,
and a high per Share value of $35.90, assuming the highest
multiple and lowest discount rate. The same analysis based on
the projected earnings per Share for 1999 indicated a range of
$26.90 to $41.22 per Share.
Stand-Alone Unlevered Discounted Cash Flow Valuation
Blackstone also conducted an analysis of the stand-alone
discounted cash flow valuations of CNW using unlevered cash flows
and assuming the projections in CNW's Business Plan. Based on a
capital asset pricing model ("CAPM") analysis, Blackstone
utilized a range of 11%-14% for CNW's weighted average cost of
capital. Blackstone estimated a value at the end of five years
for CNW of 6.0x-7.0x (the "exit multiple") projected 1999 EBITDA.
This analysis produced a low valuation of $32.20 per Share,
assuming an exit multiple of EBITDA of 6.0x and a weighted
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average cost of capital of 14%, and a high valuation of $46.30
per Share, assuming an exit multiple of 7.0x and a weighted
average cost of capital of 11%.
Potential Value to Union Pacific - Pro Forma Merger Analysis
Blackstone noted that, based on estimates of potential cost
savings in a combination of CNW and Union Pacific provided to
Blackstone by CNW's management, and based on the fact that Union
Pacific's borrowing costs are likely to be lower than CNW's, an
acquisition by Union Pacific of CNW would lead to accretions to
Union Pacific's earnings per share at prices involving
significant premiums to CNW's current Share price. Blackstone's
analysis indicated a possible accretion to Union Pacific's 1995
estimated earnings per share of approximately $4.53 assuming
annual combination synergies of $40 million, $80 million and $120
million and assuming a range of purchase prices from $27.50 to
$37.50 per Share. The analysis indicated that Union Pacific's
earnings per share could increase from as little as $0.11 per
share, assuming a $37.50 purchase price and $40 million of annual
synergies, to as much as $0.49 per share, assuming a $27.50
purchase price and $120 million of annual synergies. Blackstone
noted that while the estimated synergies presented by Union
Pacific and CNW in the Control Application were higher than the
$40 million-$120 million assumed in the pro forma merger
analysis, CNW's management advised Blackstone that because of the
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uncertainties inherent in achieving certain of such synergies,
particularly in connection with certain revenue enhancements, it
would be appropriate to discount such estimated synergies in the
context of a valuation analysis. Since it would be unusual for
an acquiror, such as Union Pacific, to transfer all, or
substantially all, of the combination benefits of a transaction
to the selling party's shareholders, Blackstone noted that the
potential per Share values implied by this analysis were unlikely
to reflect the price which Union Pacific would be willing to pay
CNW"s shareholders.
Value to Union Pacific - Discounted Cash Flow
Blackstone conducted an analysis of the potential discounted
cash flow value of CNW to Union Pacific using unlevered cash
flows and assuming $80 million of annual combination synergies
and also assuming the projections in the Business Plan. The
analysis indicated a range of per Share values assuming exit
multiples of 6.0x-7.0x projected 1999 EBITDA and, based on a CAPM
analysis, a weighted average cost of capital of 11% to 13% for
Union Pacific. The per Share values resulting from this analysis
ranged from a low of $44.00, assuming a 6.0x exit multiple and a
13% weighted average cost of capital, to a high of $57.70,
assuming a 7.0x exit multiple and an 11% weighted average cost of
capital. Since it would be unusual for an acquiror, such as
Union Pacific, to transfer all, or substantially all, of the
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combination benefits of a transaction to the selling party's
shareholders, Blackstone noted that the potential per Share
values implied by this analysis were unlikely to reflect the
price which Union Pacific would be willing to pay CNW's
shareholders.
Leveraged Buy-out Valuation
Blackstone conducted an analysis of the values which might
be realized in a leveraged buy-out of CNW. Blackstone notes,
however, that given existing market conditions, the
financeability of a leveraged buy-out at any meaningful premium
to the current stock price of CNW would be uncertain. Blackstone
estimated that the upper end of likely per Share values in a
leveraged buy-out was $27.00. Blackstone further noted that,
assuming equity investors would have target returns of
approximately 25%, achieving such value would require debt and
equity investors to accept the projections prepared by CNW in the
Business Plan. If equity investors were willing to fund a
leveraged buy-out based upon the Business Plan and management's
estimate of potential annual cost savings of $46 million and a
potential $20 million decrease in annual capital expenditures,
then the implied leveraged buy-out value could be increased to
approximately $36.00 per Share. However, Blackstone noted that
the ability to obtain the required level of debt financing for
such a transaction under these assumptions was highly uncertain.
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Leveraged Recapitalization Valuation
Blackstone analyzed the potential values that might be
realized in connection with a leveraged recapitalization of CNW.
Based upon the Business Plan, Blackstone estimated that CNW could
pay a one-time special dividend to stockholders of up to $13.00
per Share, and estimated a range of values assuming the remaining
equity (with the increased leverage) traded at multiples of
estimated 1995 earnings ranging from 8.0x to 11.0x. Based on the
foregoing, the total value to stockholders would range from
$26.09 per Share, assuming the lowest multiple, to $30.99 per
Share, assuming the highest multiple. These values could
increase to $36.68 per Share and $41.80 per Share, respectively,
if one also assumed management's estimates of potential annual
cost savings and decreases in annual capital expenditures
discussed above. However, Blackstone noted that the ability to
obtain the required level of debt financing for such a
transaction under these assumptions was highly uncertain.
Other Considerations
In addition to the foregoing, Blackstone conducted such
other analyses and examinations as it deemed necessary in
arriving at the opinion. Blackstone did not approach third
parties to solicit indications of interest in acquiring CNW.
In the course of its investigation, Blackstone relied upon,
and assumed the accuracy and completeness of, publicly available
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information and the financial and other information provided to
Blackstone by CNW, but Blackstone did not assume any
responsibility for independent verification of any of the
foregoing information. With respect to financial forecasts,
Blackstone relied upon CNW's assurances that they had been
reasonably prepared on bases reflecting the best currently
available estimates and judgments of CNW's management as to the
future financial performance of CNW. Blackstone expressed no
view as to such financial forecasts or the assumptions on which
they were based. In addition, Blackstone did not make an
independent evaluation or appraisal of the assets of CNW, nor was
Blackstone furnished with any such evaluation and appraisals.
Blackstone's opinion was based on circumstances existing and
disclosed to Blackstone as of March 16, 1995.
The various financial analyses employed by Blackstone in
reaching its opinion, as summarized in this statement, should not
be examined in isolation, but instead must be considered as
contributing to an overall judgment regarding the fairness of the
Offer and Merger. Furthermore, the ranges of values presented in
such analyses were not intended in any specific instance to
represent definitive conclusions of the value of CNW. First, in
performing its analyses Blackstone made numerous assumptions with
respect to industry performance, general business, economic,
market and financial conditions and other matters, many of which
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are beyond the control of Union Pacific, UP Rail or CNW. Second,
the specific analyses described in this statement do not purport
to be appraisals and, when viewed in isolation, are not
necessarily indicative of actual values or actual future results.
For example, no public company utilized as a comparison is
identical to CNW, and none of the precedent transactions utilized
as a comparison is identical to the Offer and the Merger.
Accordingly, an analysis of publicly traded comparable companies
and precedent transactions does not afford mathematical
conclusions. Rather, it involves complex considerations and
judgments concerning differences in financial and operating
characteristics and other factors.
Nevertheless, when taken as a whole, the entire range of
analyses undertaken by Blackstone, and the ranges of Share value
thereby indicated, support Blackstone's opinion.
Conclusion
Based upon and subject to the foregoing, it was Blackstone's
opinion, as stated in its letter to the Board of Directors of CNW
on March 16, 1995, that, as of the date thereof, the cash
consideration of $35.00 per Share to be received by holders of
the Shares of CNW pursuant to the Offer and the Merger was fair
to such holders of Shares of CNW from a financial point of view.
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The Blackstone Group
March 16, 1995
Board of Directors
Chicago and North Western
Transportation Company
165 North Canal Street
Chicago, Illinois 60606
Dear Sirs:
You have asked our opinion with respect to the fairness from a
financial point of view to the holders of Common Stock of Chicago
and North Western Transportation Company ("CNW" or the "Company")
of the cash consideration to be received by such holders pursuant
to the Agreement and Plan of Merger, dated as of the date hereof
(the "Merger Agreement"), among CNW, Union Pacific Corporation
("UP") and an indirect wholly owned subsidiary of UP (the "Pur-
chaser"). The Merger Agreement provides, among other things,
that the Purchaser will make a cash tender offer for all
outstanding shares of Common Stock of CNW at $35.00 per share
(the "Offer"), and that following consummation of the Offer, the
Purchaser will merge with CNW in a transaction (the "Merger") in
which all outstanding shares of Common Stock of CNW, other than
shares held by UP and its subsidiaries, will be converted into
the right to receive $35.00 per share in cash.
In arriving at our opinion, we have reviewed the Merger Agreement
and related documents, certain publicly available information
relating to the business, financial condition and operations of
CNW, and certain financial and other information, including
financial forecasts, furnished to us by CNW that is not publicly
available. We have met with certain senior officers of the
Company to discuss the operations, financial condition, history
and prospects of CNW's businesses.
In conducting our analysis, we have considered the terms of the
Merger Agreement; stock price data, the historical and current
financial position and the historical and projected cash flows
and results of operations of the Company; historical financial
information and stock price data with respect to certain public
<PAGE>
Board of Directors
Chicago and North Western
Transportation Company
Page 18
companies with operations that we considered comparable to those
of CNW; and prices paid in certain other business combinations
involving companies with operations that we considered comparable
to CNW. In addition to the foregoing, we have conducted such
other analyses and examinations as we have deemed necessary in
arriving at our opinion. We have not approached third parties to
solicit indications of interest in acquiring the Company.
In the course of our investigation, we have relied upon, and have
assumed the accuracy and completeness of, publicly available
information and the financial and other information provided to
us by the Company, but we have not assumed any responsibility for
independent verification of any of the foregoing information.
With respect to financial forecasts, we have relied upon the
Company's assurances that they have been reasonably prepared on
bases reflecting the best currently available estimates and
judgments of the Company's management as to the future financial
performance of CNW. We express no view as to such financial
forecasts or the assumptions on which they were based. In
addition, we have not made an independent evaluation or appraisal
of the assets of CNW, nor have we been furnished with any such
evaluation and appraisals. Our opinion is based on circumstances
existing and disclosed to us as of the date hereof.
We have acted as financial advisor to the Company in connection
with the Offer and the Merger and will receive a fee for our
services, including for rendering this opinion. In addition, an
affiliate of The Blackstone Group L.P. owns shares of Common
Stock of the Company amounting to less than 0.1% of the total
issued and outstanding Common Stock, and a partner of The
Blackstone Group L.P. is a member of the Board of Directors of
the Company. The Blackstone Group L.P. has performed various
financial advisory services for the Company in the past and has
received fees for such services.
Based upon and subject to the foregoing, it is our opinion that,
as of the date hereof, the cash consideration to be received by
<PAGE>
Board of Directors
Chicago and North Western
Transportation Company
Page 19
holders of Common Stock of CNW pursuant to the Offer and the
Merger is fair to such holders of Common Stock of CNW from a
financial point of view.
Very truly yours,
THE BLACKSTONE GROUP L.P.
By: /s/ J. Tomilson Hill
J. Tomilson Hill
<PAGE>
STATE OF NEW YORK )
: ss:
COUNTY OF NEW YORK )
J. TOMILSON HILL, being duly sworn, states that he is a
General Partner of Blackstone Group Holdings, L.P., an affiliate
of The Blackstone Group, L.P.; that he has knowledge of the
matters set forth in the attached statement; and that all
statements made and matters set forth therein are true and
correct to the best of his knowledge, information and belief.
/s/ J. Tomilson Hill
J. Tomilson Hill
Subscribed and sworn to
before me this 4th day
of April, 1995
/s/ Adele A. Giuliano
Notary Public
ADELE A. GIULIANO
Notary Public, State of New York
No. 24-4965431
Qualified in Kings County
Certificate filed in New York County
Commission Expires 4/96
