The Interstate Commerce Commission Tuesday approved the sale of Southern Pacific Railroad to Denver & Rio Grande Western Railroad for $1.02 billion, a merger that creates the nation's fifth-largest rail system. A Utah D&RGW spokesman said it will enhance service and competitiveness for the state's rail freight users.
The Southern Pacific operates up and down the West Coast and along the southern tier of the country with tracks stretching from Portland, Ore., through central California through El Paso, Texas, and as far east as New Orleans. It also operates from St. Louis to the Gulf Coast.The Denver-based D&RGW operates a rail line from St. Louis to Ogden.
That system will now be combined, under the name Southern Pacific Transportation Co., into one 15,000-mile, 15-state operation with headquarters in San Francisco.
Jack A. Stauffer, D&RGW's Salt Lake director of marketing and sales, told the Deseret News the merger will be good for local business.
"It will ensure competitive single-line rate potential through the central corridor (of the United States), which gives people of Utah and Colorado a competitive route with the Union Pacific Railroad. That's very important in today's deregulated world."
Stauffer said he did not know if the merger will mean any additional jobs in Utah. He said D&RGW employs some 500 in the Utah division. "But we should see increased traffic through this corridor."
He said there are no immediate plans to merge the line into a single railroad, meaning the Southern Pacific Lines, Denver & Rio Grande Western Railroads and another subsidiary, St. Louis Southwestern Railway Co., will keep their names.
"It's all part of the same system, but we will each retain our identity," said Stauffer.
Tuesday's action comes out of the ICC's denial of a merger between Southern Pacific and the Santa Fe Southern Pacific Railroad. The merger was never completed because the ICC ruled, in 1986, that it would reduce competition in the industry.
The larger Southern Pacific has been held in a voting trust since 1983 when it entered a merger agreement with the Sante Fe Railway to create the Sante Fe Southern Pacific Co.
In making its decision Tuesday, the ICC turned down a rival $1.25 billion bid by the Kansas City Southern Railway, which Commissioner Paul Lamboli called inadequate and anti-competitive.
The new rail system will have 15,000 miles of track compared with 24,000 for the Union Pacific, the nation's largest railroad, and will serve 15 states extending east from California to Missouri and south from Oregon to Louisiana and southern Texas.
Currently, the Southern Pacific has some 13,000 rail miles while the Denver and Rio Grande has 2,200 miles of track.
The two railroads "are a natural fit of logical allies _ so natural it's a wonder the combination wasn't accomplished long ago," said Philip Anschutz, owner of Denver-based Rio Grande Industries, parent company of D&RGW Railroad. Anschutz said the merger should be completed by December.
The Southern Pacific has been unprofitable since it went into trusteeship in 1983, a state that limits management's ability to make long-term plans and financial commitments.
"The Southern Pacific has to enter the real world of active competition and real growth as soon as possible," Commissioner J.J. Simmons said before the vote.
In addition to the $1.02 billion purchase price, the Denver and Rio Grande agreed to absorb some $600 million in outstanding Southern Pacific debt, meaning the total purchase prices was actually $1.8 billion.
The new railroad will have 26,300 employees and combined operating revenues of $2.5 billion for 1987.