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MoPac Mergers that Didn't Happened
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What If?
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 and Rock Island
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 have made!

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.

The price of the Santa Fe stock soared and Marbury was forced to back off.

(adapted from "Rebirth of the Missouri Pacific" by Craig Miner <for more, read...pg 130, 131, 136>)

Even at 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 requirement.

the Illinois Central
Another 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
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 the 1970s.

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.
Another interesting historical aspect of the Missouri Pacific to delve into involved the Van Swerigens and the Allegheny corporation.

The Van Swerigen brothers, Oris 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. The brothers "were" the Allegheny coproration, and therefore owned the MoPac for a time. 

The Vans 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 in 1935.

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)

Other Rumblings
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
Finally, 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 takeover.

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 Merger
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 Southern.

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)


the Katy
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.

 

Recommended Reading:

  • 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)

 

Thanks 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)

 


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