By H. Josef Hebert
August 10, 1988

Rio Grande Industries Inc. received government approval yesterday for its $1.2 billion purchase of the Southern Pacific Railroad, one of the nation's oldest rail lines with track stretching from Oregon to Louisiana.

The Southern Pacific, which has 15,000 miles of track, will retain its name and incorporate into its operations the smaller Denver & Rio Grande Western Railroad once the purchase is completed, company officials said.

By a 4-0 vote, the Interstate Commerce Commission gave approval for the railroad's sale by its parent, Sante Fe Southern Pacific Corp., to Rio Grande Industries, a subsidiary of the Denver-based Anschutz Corp.

Philip Anschutz, owner of the privately held company, told reporters he intends to concentrate on reducing Southern Pacific's debts, partly through the sale of some of its real estate holdings, and modernize the railroad's equipment and facilities.

"We will be in the railroad business, first and foremost," said Anschutz.

Anschutz, who has a reputation of being reclusive, acknowledged that he had never before held a news conference, but he said he wanted to meet with reporters to put to rest unfounded "rumors," including one that he sought the Southern Pacific to break it up and make a quick profit.

"It's very important that this company be kept together," he said.

The Anschutz Corp. purchased Rio Grande Industries four years ago.

William Holtman, chairman of Rio Grande Industries, expressed confidence in Anschutz's devotion to railroading. "He's a long-term player," Holtman said of Anschutz.

The ICC said the merger of the Southern Pacific and the Denver & Rio Grande Western railroads would have the best competitive benefits and be in the public interest. The merger was recommended by both the Justice Department and the Transportation Department.

The commission last year ordered the Chicago-based Santa Fe Southern Pacific Corp. to divest itself of either the Southern Pacific or the Santa Fe railroads after it rejected a proposal to merge the two rail lines. The company chose to sell the Southern Pacific.

Southern Pacific's stock has been held in a trust for nearly five years pending the outcome of the battle over who should own the railroad.

"We look forward to completing the sale, getting out of trusteeship and moving forward again with a clear idea of Southern Pacific's future course and direction," said Denman McNear, chairman of the Southern Pacific Transportation Co.

Anschutz said the Southern Pacific's management team would be chosen from among the senior managers of both the Southern Pacific and the Denver & Rio Grande Western.

Kansas City Southern could challenge the ICC ruling in court, but the company's president and chief executive, Landon Rowland, said no decision has been made.

Both railroads have been closely intertwined with the history of the West, helping to bring in settlers, miners and industry. Southern Pacific's founders helped drive the golden spike in Utah in 1869, completing the country's first transcontinental rail line.

The Interestate Commerce Commission's decision yesterday to allow Rio Grande Industries to buy the Southern Pacific Railroad is the latest in a complex series of events.

1983: Souther Pacific and Santa Fe Railway agree to merge, becoming Santa Fe Southern Pacific Co.

1986: The ICC denies merger, saying it would reduce competition.

June 1987: ICC refuses to reconsider decision and orders Sante Fe Southern to sell one of the two railroads.

Dec. 1987: After considering seven offers, Sante Fe Southern asks ICC permission to sell Southern Pacific Co. to Rio Grande.

Feb. 1988: The ICC agrees to decide on Santa Fe Southern's request within 180 days. Kansas City Southern Railway, whose offer for Southern Pacific was spurned, objects to the merger proposal.