UNION PACIFIC GETS ICC NOD TO BUY KATY

UNION PACIFIC GETS ICC NOD TO BUY KATY

The Interstate Commerce Commission approved the Union Pacific Railroad Co.'s acquisition of the Missouri-Kansas-Texas Railroad Co., and ordered few protective conditions on the transaction.

The approval of this parallel merger will lead to substantial job losses and the abandonment of about 310 miles of track; the Katy's primary lines are

from the Gulf Coast north to Kansas City and St. Louis.During hearings on the request, UP officials said some 350 miles of track will eventually be abandoned, and some 1,100 workers will lose their jobs.

At a press briefing Monday, Joseph Dettmar, of the ICC's rail services division, defended the merger, even though, he said, essentially the entire Katy system, or most of it, is parallel to the UP's lines.

The primary question the commission had to answer, he said, was, Is there going to be an adverse impact on competition as a result of this deal. Mr. Dettmar said the ICC had concluded that there is a good deal of competition left after the merger . . . .

The commission in the past has rejected parallel mergers because they nearly always reduce competition, in favor of encouraging end-to-end mergers that link non-competing carriers into bigger systems.

The ICC's consideration of the merger had been stalled since mid-March, when an internal squabble led to the cancellation of an open voting conference after Chairman Heather J. Gradison said Commission J.J. Simmons III had proposed amendments too late in the process.

Mr. Simmons had seven areas he wished addressed in the protective conditions to be attached to the merger; it appears that none of his concerns were satisfied.

Under the order, the ICC accepted a deal struck between the UP and the Southern Pacific Transportation Co. to address some of the anti-competitive aspects of the merger north and west of Kansas City and from a few points in Texas to Houston.

The commission also told the UP to grant trackage rights for grain movements to either the SP, Kansas City Southern Lines or the Atchison, Topeka & Santa Fe Railway.

The ICC said it would monitor the interchange traffic patterns at Herrington, Kan., involving the Denver & Rio Grande Western Railroad before deciding at certain protective conditions sought by that railroad.

At the Dec. 1 hearing on the merger, the representatives of the Santa Fe, Burlington Northern, KCS and Texas Mexican railroads requested trackage rights; the Rio Grande asked the ICC to reject it and, failing that, to grant it trackage rights as well.

UP officials had characterized Katy as a declining railroad suffering from too much competition and too small a system. The UP said Katy's net revenue declined from $37 million in 1981 to $5 million in 1986, which meant a decline in return on investment from 11 percent to 1 percent.

At the hearing, the departments of Justice and Transportation both asked the ICC to award the primary trackage concessions not to the SP, as sought by the UP, but to the Santa Fe, which they said would make for more competition.

UP said it was the only company that had expressed an interest in buying Katy, and that it was interested only because it uses some 365 miles of Katy's system in its main line.

The ICC ordered the New York Dock case level of protection for the affected employees, the highest level usually granted by the commission. It will require the UP to work out an implementing agreement with its unions that spells out how employment decisions will be made.

The order will become official on Thursday, at which time copies of the written decision are expected to be available.

Commissioners Gradison and Frederic N. Andre voted for the merger; Commissioners Simmons and Paul Lamboley wrote concurring opinions and Commissioner Malcolm M.B. Sterrett did not participate.