Directors of the Burlington Northern and St. Louis San Francisco Railway Co. (Frisco) yesterday approved a merger that could be the start of a long-planned consolidation of Western and Midwest rail firms.
Already the longest railroad in the country with 27,000 miles of routes in 19 states and 2 provinces of Canada, BN would pick up the 4,000-mile Frisco and new routes into the Southeast and Southwest if the merger is approved by stockholders and the federal government.
The proposed merger would be accomplished through a stock exchange valued at about $140 million, based on current prices for the two rail firms' stock.
Officers of the two companies said yesterday a petition seeking government approval for the combination will be filed this month with the Interstate Commerce Commission.
Just last week, the BN bitterly accused the ICC of "a classic case of regulatory lag" for waiting three years to approve a BN takeover of the Green Bay & Western Railways a small line snapped up at the last minute by an unregulated investment firm that offered a higher bid for GB&W stock than BN.
ICC chairman Dan O'Neal defended his agency, last week noting its responsibility to hear the complaints of railroads opposed to the BN merger.
In the case of the BN-Frisco combination, however, the ICC will be bound by a new law that requires action in merger cases within 31 months after a petition is submitted.
Although other Midwest rail executives have been silent to date on the prospects for an expanded BN, several railroads are expected to oppose the merger - the first major combination to come before the ICC since a rail reorganization act became law last year.
The bankrupt Chicago, Rock Island & Pacific, for example, long has offered the only direct rail link from Northwest Iowa and the Minneapolis St. Paul area (where BN is based) to the Gulf Coast and is expected to protest the potential loss of business to a BN-Frisco merger, particularly for long-distance coal and grain shipments.
William M. Gibbons, trustee for the Rock Island, said in a telephone interview from Chicago yesterday that while he hasn't completed studies of the proposed merger yet, "We probably will oppose it . . . it would adversely affect us on routes . . . we serve very adequately."
Gibbons said other Midwest lines have been conducting studies of the merger and forecast the Rock Island will not be the only opponent. Officials at the Milwaukee Road, who could not be contacted yesterday reported are prepared to oppose the merger.
however, one goal of the 1976 law was to faciliate rail mergers, and Wall Street analyst Isabel H. Benham, of the firm of Shearson Hayden Stone, Inc., forecast last night that the ICC will approve the merger.
For one thing, she noted in a telephone interview from New York, the proposal is for an "end-to-end" merger of lines that do not currently compete, meaning less of an impact on current services and employees.
BN and Frisco, based in St. Louis, will seek approval of the merger from stockholders at the railroads' annual meetings scheduled for May 11 and May 9, respectively. Each share of Frisco common would be exchanged for 95 share of BN common and one half share of a new preferred stock with a $25 redemption value and dividends of $2.125 a share annually.
At BN, meantime, directors have approved chairman Louis W. Menk's request to be relieved of day-to-day management as chief executive starting in May.