Major railroad industry warfare erupted yesterday as Washington based Southern Railway sought to halt government consideration of a plan to merge Chessie System and Seaboard Coast Line into what would be the nation's largest rail system.
In a petition filed with the Interstate Commerce Commission. Southern said that agency could not evaluate any merger plan until an antitrust case against Seaboard is settled.
The antitrust proceedings, also before the ICC, were initiated after a complaint by Southern in 1977 that alleged violations of the Clayton Act had occurred when Seaboard increased its ownership of the Louisville & Nashville -- another major southeastern rail line.
At hearings that lasted six months last year, the ICC's own Bureau of Investigations and Enforcement suggested that Seaboard could be forced to give up its ownership of L&N and two smaller lines over a five-year period.
Southern said yesterday that if this course is selected by the full commission, all planned connections of the Chessie and Seaboard system would be eliminated except for Richmond, casting doubt on many purported benefits of the merger plan.
Other suggestions being considered by the ICC would require the sale of different assets -- including a Chicago-Louisville rail route, which would be taken over by Southern. Essentially, the Washington firm has charged that Seaboard's full takeover of the L&N has reduced competition in the region.
"The application, as filed, assumes that the commission will take no action whatever as a result of the pending Clayton Act investigation and does not deal in any way with any of the alternative situations which may result from such an investigation," Southern charged yesterday.
If not rejected as incomplete, the merger plan should be dismissed as premature, the Washington railroad argued.
Chessie and Seaboard filed their merger application on Jan. 18, proposed a combination on a 50-50 basis to form CSX Corp., in a,1 billion transaction. Stockholders of the two railroad companies are scheduled to vote next week on the merger, which until now has generated no significant opposition.
@a c/hessie spokesman said last night Southern's petition to the ICC caught his company by surprise, but he declined comment until his firm could see a copy of the document.
Seaboard has told the ICC that it and its predecessor companies have controlled L&N for more than half a century -- albeit with less stock ownership (33 percent vs. 100 percent). "There is nothing SCL can do today --or has done -- regarding its control of L&N that" could not have been done in previous years, SCL stated.
SCL's railroads include the Seaboard, L&N, Clinchfield, Georgia and six smaller lines, while Chessie owns the Chesapeake & Ohio, Baltimore & Ohio and Western Maryland.
The proposed merger would "consolidate control of two complementary railroad systems which geographically meet end to end, and will produce net pretax benefits to the new system of approximately $65.9 million per year beginning in the third year," Chessie and SCL have told the ICC.
In their formal merger application, the two railroads also detailed new business they expect to gain -- some at the expense of Southern.