Rail Users Group Supports Merger / Missouri-Kansas-Texas

By Case, Patti | THE JOURNAL RECORD, October 16, 1986 | Go to article overview

Rail Users Group Supports Merger / Missouri-Kansas-Texas


Case, Patti, THE JOURNAL RECORD


Support of the proposed acquisition of the Missouri-Kansas-Texas Railroad Co. by rail and energy giant Union Pacific Corp., was approved Wednesday by the Oklahoma-Kansas-Texas Rail Users Association.

Included in the purchase would be the Oklahoma, Kansas & Texas Railroad Co., a wholly-owned subsidiary of Dallas-based Missouri-Kansas-Texas.

The agreement between Katy Industries - which owns 98 percent of Missouri-Kansas-Texas Railroad - and Union Pacific is an estimated $108 million transaction. It is scheduled to be filed with the Interstate Commerce Commission on Nov. 14, for approval.

New York-based Union Pacific would buy all Missouri-Kansas-Texas stock. Minority stockholders would receive cash and Katy Industries would receive cash and securities, according to the merger plan.

Union Pacific plans to merge Missouri-Kansas-Texas with Union Pacific Railroad Co. of Omaha, Neb., a subsidiary of Union Pacific. Missouri-Kansas-Texas is a subsidiary of Katy Industries Inc. of Elgin, Ill.

The effort to merge the two lines has been stymied twice since talks first began because of beleagured Missouri-Kansas-Texas Railroad's unsuccessful attempts to acquire by tender offer a total of 60 percent of its registered certificates. The offer started at $25 and rose to $39.75 in a third - and successful - attempt to bring in the certificates, valued at about $10 million.

Proponents of the merger have said Union Pacific would lend some of its financial strength to the railroad system in the mid-southwest, and provide better access to additional markets.

Union Pacific had revenues of $3.78 billion in 1985 for its transportation divisions alone, and net income of $322 million. Missouri-Kansas-Texas had revenues of $264.79 million and net income of $1.39 million in 1985.

The rail users association - in Oklahoma City to discuss the merger at a special meeting - was formed in 1982 to represent shippers along the line running from Salina, Kan., to Ft. Worth. The portions of that line in Kansas and Texas were purchased by Oklahoma, Kansas & Texas Railroad for $25 million, while the state of Oklahoma acquired the portion of track within Oklahoma for $15 million from the trustee of the now-defunct Rock Island Railroad Co.

Oklahoma, Kansas & Texas Railroad is engaged in a lease-purchase agreement with the state of Oklahoma for the line running through Oklahoma.

The rail users raised $3 million in 1982 which was then loaned to Missouri-Kansas-Texas for operating capital to get the former Rock Island line operational.

The rail users association approved a resolution which:

- Authorized the officers of the association to tell Union Pacific that the association will lend its active support to the merger before the Interstate Commerce Commission, providing that Union Pacific agrees in writing not to abandon any rail freight service on the railroad lines represented by the association, without the prior written consent of the association. …

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