MISSOURI PACIFIC MERGERS THAT DIDN'T HAPPEN
and the BIG ONE THAT DID
Compiled & Written by T. Greuter
Santa Fe engines
with screaming eagles? It didn't happen, but there were people working
very hard behind the scenes at the railroad to make Missouri Pacific Chairman
William Marbury's ambitious dream a reality.
One morning I received
a question concerning merger "What Ifs" .... roads that the MoPac was
interested in merging with, but for some reason or another didn't quite
happen. Seems like that could have been just about any of the Class 1
roads during the 1960's and 70's. In light of the most recent mergers,
BN/Santa Fe and UP/Southern Pacific, or the current rumors following wildcard
Norfolk Southern intentions amidst the alwats fluid merger landscape brings
a certain sense of relevency to current events in the railroad industry.
I began persuing the subject of the various merge talks that the MoPac
considered.... this is some of what I found.
the Santa Fe
Perhaps the most notable of MoPac's non-mergers during the modern merger
movement were the talks the company had with the Santa Fe. Some fairly
serious talks were underway during (date). In fact, the Santa Fe was among
the most serious merger goals that MoPac was persuing at the time. The
Mopac had aquired nearly 50% of the ATSF stock, and it was looking like
a sure thing, but the deal went south. The melding of these two roads
would have been an intersting combination. Just imagine it, what a sight
a warbonnet with with a large white screaming eagle on the flanks would
June 6, 1963... at
the same time the Texas & pacific and the Chicago & Eastern Illinois
proposals were floating around MoPac corporate headquarters, a memo went
out about gaining control of a railroad simply referred to as "Railroad
X"... "X" was none other than the mighty ATSF.
The idea was originally
presented by Downing Jenks. There were plenty of doubts, but the people
at MoPac were always taking on the odds and decided it was worth a try.
After all, many of these same people felt that the Santa fe would be an
excellent "fit" with the MP system. Another reason was that
ATSF was interested in the Rock - the southern part of which was in MP
territory. Like any business, the heads of the company thought it was
better to move to ally with the Santa Fe people rather than compete.
MoPac would first
buy $33 million worth of ATSF stock. Marbury's next planned step after
control was achieved was to find an Eastern railroad as another partner
and form the first true transcontinental system.
There were severl
methods that the merger might be accomplished: approach the ATSF people
with the idea of together merging with the Rock Island; by buying stock
and merging the two; to buy the road; to negotiate with the ICC for authorization
to control ATSF; and to exchange 400,000 shares of MP stock for 1.6 million
of Santa Fe's. In June 1963, ATSF president Ernest Marsh began to explore
the possibility of merging with MoPac. A traffic study was made the following
year, which conclded that MP, T&P and the KO&G would all see increased
revenues. But with worries about how to handle the Missouri Pacific's
stock (always a problem), and the merger itself caused talks to stall
and be broken off in November 1964.
Both roads decided
to move on to deal with the issue of the Rock Island. The UP and Southern
Pacific were on one side, the Chicago & Northwestern on another...
everyone wanted a piece of the system. ATSF wanted traffic rights on the
southern Rock if C&NW won. So did the Milwaukee Road, CB&Q, the
Rio Grande and the Katy.
A UP-Rock merger was
very unpopular with the rest of the industry. MoPac was not against consolidation
with another Class 1 however. Far from it. It
was in the new doctrine of the railroad's leadership. MP Chairman Marbury
was the driving force behind the Santa Fe-MP merger (the same force that
would eventually lead to the ultimate UP-MP-WP mega-merger). Marbury saw
a handful of big railroads as the future of railroading, and he acted
aggressively to protect the MoPac's interests, so that the company would
not be left out of the big "urge to merge". From
January to February 1966, Marbury made his move -- overnight the MoPac
had become the single largest holder of Santa Fe stock, no other holder
was even close. His
plan was to continue stock purchases of the Santa Fe until control was
achieved over it. But the executives at Santa Fe wanted nothing to do
with it. John Reed, Santa Fe new president, stated that he would do all
he could to resist merger with the Missouri Pacific.
of the Santa Fe stock soared and Marbury was forced to back off.
from "Rebirth of the Missouri Pacific" by Craig Miner <for
more, read...pg 130, 131, 136>)
the time of the MoPac's merger with the Union Pacific, MoPac still had
about a 20% interest in the ATSF. This interest had to be sold as a merger
the Illinois Central
merger plan that did not come to pass ... another road MoPac was showing
interest in during the early 60's was the Illinois Central, but these
talks broke down after the C&EI entered the picture. When the UP and others
were threatening to take over the Rock Island, the MoP renewed it's interest
in the I.C. as a defense of it's interests. The merger of the Rock with
one of her suitors would have some financial consequences on the MoPac.
Another idea thrown around was a Rio Grande-MP-Western Pacific merger
as a defense against the UP-Rock Island proposal. There
were negotiations with the UP as well, including talk of a MP/IC/UP mega-merger,
but the messy situation with the Rock merger/fiasco threw a wrench in
the works. We could have seen a MP-UP merger happen a decade earlier.
The Southern and Missouri Pacific talks were another
signifant non-mereger. The time period of the 1970's was not a good decade
for the railroads. Amtrak took over the railroads' unwanted passenger
service. The mighty Penn Central fell. The average return on the railroad's
investment in the 1970s was a mere 2%.
The most tarnishing
non-merger happened during this time as well. The ICC allowed the failing
Rock Islandto languish for 11 years before granting it's approval to merge
with UP. By that time the UP was no longer interested. Tthe Rock ultimately
went belly-up in 1975, it's assets divided among the rail survivors in
1980. In view of this light, the railroads were not eager to merge in
Back in the mid to
late 70's, the MoPac and Southern were very heavy into merger talks. They
had been operating run-through trains in two corridors for several years.
They operated the SMU and UMS pair between Memphis and Kansas City with
the U in the symbol being for Union Pacific, who operated the train to/from
North Platte. "S" was for Southern and "M" for Memphis.
They also ran the CJZ/JCZ trains. These trains were supposed to compete
with the Family Lines (SCL/L&N/CRR/GA/A&WP) between Jacksonville
and Chicago. These trains operated over the MoPac (and predecessor C&EI)
between Mt Vernon, IL and 37th Street Yard in Chicago. This train had
intermodal, automobile and manifest freight loading. When Southern hooked
up with N&W, these trains lost their importance and the "Z"
was dropped from the symbols. Soon it became a several times a week train
instead of daily, and shortly thereafter it was dropped completely as
the new NS coordinated operations and it became an all NS move.
The story I was told while working at MoPac was that there were some serious
differences in the entire merger plan that stalled the talks but did not
end the issue. During this lull in discussions is when the Union Pacifc
came in with what was essentially a hostile takeover. Their offer was
unsolicited and not very warmly received, but we all know what wound up
happening. With the UP coming into the picture, Southern walked away from
the talks and sought out the N&W.
The MoPac's scenic
White River route figured heavily in Southern's view. The line would give
the Southern access to many profitable connections.
A MP/Southern merger would have presented a nice clean map, meshing the
Southern's east coast and southern system with MoPac's midwest and southwestern
system, with major connections between the two at St. Louis, Memphis and
New Orleans. If implemented it would have had a major effect on the railroad
landscape seen today.
During the time of
talks, Southern units were on the MoP everywhere, and vice versa. There
were signs that this perhaps was the merger that the MoP had fought so
hard for since the early 1960's.
(thanks to Tuch Santucci)
the Penn Central,
the Vans and Allegheny Corp.
historical aspect of the Missouri Pacific to delve into involved the Van
Swerigens and the Allegheny corporation.
The Van Swerigen brothers,
Paxton and Mantis James, were Cleveland real estate and later railroad
tycoons. Both were lifelong bachelors so close in life they were buried
in the same plot.
"were" the Allegheny coproration, and therefore owned the MoPac for a
started out in real estate speculation and development. They were the
developers of the upscale Shaker Heights, one of the first planned communities
as we know the concept (subdivision?). When they were building a commuter
railroad between Shaker Heights and downtown Cleveland, the right-of-way
of NKP got in the way. When NKP wouldn't let their commuter line cross,
they bought NKP.
NKP had originally been supported by NYC, which still held considerable
influence in one way or another for several years.
The Vans ended up controlling Pere Marquette and the C&O as well as
NKP. They constructed Cleveland Union Terminal, whose 35-story tower was
the tallest building between New York and Chicago when built. This is
where they based their operations, and why Chessie's main offices remained
in Cleveland into the 1970's.
Toward the end, the Vans worth was closely tied to stocks, and they neared
$3 billion(!) on the eve o fthe Stock Market Crash in 1929. They later
bought back all they had had for something more like $300 million, but
I'm not sure of that number. Both died rather young, one in 1934 and one
If I recall, JP Morgan & Co. (the bank, not the man) had a large stake
in Allegheny Corp. (according to Margaret Truman in her book on Harry).
Allegheny Corp. was, according to her, the main reason MoPac was in bankruptcy
so long. After buying control of MoP after the crash, they declared dividends
out of capital and then cast the cash-strapped remnants into bankruptcy.
Maybe this can shed more light on the PC(NYC)-MP connection.
One possible scenario
for merger involved diluting out the NYC's control of one of the classes
of preferred stock. It was entirely plausable that NYC could have merged
the MoPac into PC, since it didn't divest itself of stocks like PRR did
with its stock in N&W, Wabash, or L&N prior to the merger.
With all th empire
building occuring during the 1960's, it's interesting to see how much
the Missouri Pacific effected the NKP and others as these powerful people
maneuvered for the advantage.
(thanks to James McNary/Jasper News-Gazette)
MoPac and the Denver
& Rio Grande Western shared a long history of close ties. Even
when in recievership in the 1950's, the Missouri Pacific owned a large
stock interest in D&RGW.
the Big MOP-UP
in the early 1980's, the time for the Union Pacific / Missouri Pacific'
merger looked right, and the rest is history. Though it had long been
the MoPac's 'grand master plan' to merge with another Class 1 road, it
is not widely known that the Union Pacific merger was actually hostile
The UP offer was unsolicited
and hostile. The talks with the Southern were on hiatus at the time UP
came storming in with their offer. It was more of a retaliatory thing
than anything. They were out to protect their interests. They did not
want a new level of competition. Had Southern and MoPac merged, it would
have cut UP out of some business and greatly improved the corridor to/from
Pueblo. This would have had an adverse affect on some UP business. It
also would have improved the traffic levels on the route to/from El Paso.
And again, it would have kept UP out of Chicago.
And what did
happen with the MoPac? After the UP merger the most senior MoPac
managers stayed on and most UP people retired. This made it good for them.
Those that left were handsomely rewarded for their efforts.
As someone once put
it, UP gobbled up a fish that was too big to swallow.
More on the Southern
in light of the UP
The word in those days was that the management team division was a huge
stumbling block in the Southern merger talks. From what I was told, Southern
wanted to be the big dog here and had the resources to back it all up.
It was a clash of the egos, so to speak.
For the employees, such as J.D.
"Tuch" Santucci, there may not have been quite as many layoffs
had MoPac married up with the Southern, as there would have been a lot
of additional trains in and out of Chicago, where Tuch worked. He probably
would still be there today in fact. And there would have been no Norfolk
UP would probably have had to
seek out N&W to counter a Southern-MP merger. Their only
connections were at Council Bluffs and Kansas City. And the N&W's
CB route was less than desirable at the time. Or they would have had to
purchase the Rock Island's former route into Chicago and rehab the entire
route as it was in prety sorry shape. And if you'll recall, the UP and
Rock merger was approved 13 years after they made application. It
was approved shortly after the Rock had filed bankruptcy in 75 and was
pretty much all falling apart.
At this point in time, the Rock
had shut down and shortlines were operating segments of the Chicago route,
and even then, not directly into Chicago. The EJ&E was the Directed
Operator of the line between Joliet and Bureau, IL and several other lines
were handling the other segments including the Iowa RR and even the Milwaukee
Road if I'm not mistaken. LaSalle & Bureau County (later to become
Chicago Rail Link) took over some terminal operations in Chicago and handled
the on line customers between Chicago and Joliet. Chicago's Regional Transportation
Authority (which became Metra) took control (and eventual ownership) of
the Chicago-Joliet segment granting Chessie trackage rights on the route
with all sorts of restrictions. Chessie eventually purchased the segment
between Joliet and Bureau. Iowa Insterstate took over for the Iowa RR
and Milwaukee on the route between Bureau and Council Bluffs.
The word was from Omaha (maybe
just a smokescreen) that after the Rock merger collapsed, they weren't
looking to merge with anybody anytime soon. A great deal of time and money
had already been spent on that debacle. (thanks to Tuch
Santucci for his insight into the MP-Southern talks and the UP merger)
There were discussions
with the Missouri-Kansas-Texas, though this was not about a merger
in the common sense of the word. The MKT was heavily indebted to
the MoPac for some trackage rebuilding and such which the MoPac had either
paid or done at the MoPac's expense. The debt was supposedly bad
enough that the Katy would rather "merge" than try to pay it back.
A century after Jay
Gould's efforts to consolidate his railroads (including MP and Katy) into
one system, the Katy would finally be merged into the UP system via the
MoPac... with a bit of fancy paperwork. This way both roads could becontrolled
by Union Pacific. The UP had restrictions on it at the time that restricted
it from owning the Katy outright.
- THE REBIRTH OF
THE MISSOURI PACIFIC 1956-1983, by Miener
- THE EAGLE - Fall
1985 (MPHS Magazine), "Southern Connections" by Tony Fey (Order backissues
of this magazine from the MPHS Store)
to the following for their valuable input:
George Simmons, CreaghDubh, J.D.
Stryker, 'Tuch' Santucci, Jerry Michels, John Fike, Elvin Klepzig,
Jim Ogden, and James McNary-Editor, Jasper (MO) News-Gazette (Jasper,
on the White River Line north of Carthage)