The acquisition plans of the Union Pacific Corp. and Delcor Inc. have each experienced some difficulty in the last week, jeopardizing more than $2.3 billion of potential bank financings.
The Santa Fe Pacific Corp. at least temporarily derailed Union Pacific's bid when it recommended last week that its shareholders refuse the unsolicited offer. Santa Fe said Union Pacific should improve the financial terms of its $3.2 billion offer.
In response to an unsolicited offer in a different sector, National Gypsum Co. rejected a $940 million takeover bid by Delcor. National Gypsum, the nation's second-largest wallboard maker, reportedly cited an "inadequate" price and "highly conditional" terms of Delcor's offer.
Santa Fe Thursday said it scheduled a shareholders' meeting for Jan. 27. Santa Fe has looked to Burlington Northern Inc., a bidder with whom it had already signed a purchase agreement, as something of a white knight, discussing ways to block the competitive Union Pacific bid.
One reported plan calls for both Santa Fe and Burlington Northern to buy back outstanding Santa Fe stock. Burlington Northern could then acquire Santa Fe through a stock swap.
Supporting Union Pacific's $3.2 billion bid is a $2 billion loan led by Citibank, NationsBank, ad Credit Suisse. The Three banks held a meeting in New York On Dec. 1.
Sources close to the deal said the facility was well received by banks and that the syndication was nearing completion.
While Santa Fe hasn't warmed to Union Pacific's offer, bankers certainly have. Sources close to the deal say that the $2 billion loan has been oversubscribed to $3.7 billion.
Sources say that 17 banks have signed on as managing agents, committing $200 million. Market sources say this high level of commitment from so many banks reflects the allocation game, where banks show they can perform for an attractive company.
Union Pacific has not approached its banking group to increase the facility. A market source suggested that if they wanted to raise more money, "it would be absolutely no problem."
Bankers were not particularly surprised by Santa Fe's reaction to Union Pacific's bid. Some speculated that Santa Fe was holding out to keep upper-level management jobs.
"What's the difference between an unsolicited offer and a hostile bid?" asked one banker. "Not all that much."
Industry followers did not think Union Pacific, which had bid slightly more per share than Burlington, would necessarily try to sweeten its offer.
"Right now, they'd be bidding against themselves," said Burton Lehman Brothers.
Mr. Strauss said that he didn't think any other bidders would enter the picture.
At the beginning of December, Union Pacific seemed to have gained some momentum when the Interstate Commerce Commission approved a voting trust. The trust would protect Santa Fe shareholders if anticompetitive concerns were to kill the deal.
Union Pacific finally gained its first audience with Santa Fe management since its late October bid.
The trust "made it necessary [for Santa Fe management] to talk to [Union Pacific management] from a fiduciary point of view," said Mr. Strauss. "It doesn't mean they've changed their mind."
Bankers say that unsolicited offers are not usually particularly well received. "Corporations don't like to be taken over by those that they don't ask," said one banker.
Bankers who had signed on to the Union Pacific syndication did so because "we like to go with whomever will be standing at the end," said another banker.
Delcor, which currently holds 19% of National Gypsum's common stock, had offered the wallboard manufacturer approximately 43.50 per share. Several analysts immediately decried that price as almost $20 per share too low.
Delcor had arranged the financing with the support of Charlotte-based regional rivals First Union, Corp. and NationsBank Corp.
The two banks had each committed $134.1 million of nonvoting preferred and common stock of Newco, a Delcor holding company for National Gypsum.
Bank affiliates had also committed to provide a total of up to $375 million in senior term debt and revolving-credit financing.
Lafarge Coppee, a French cement and building-products concern with a 10% National Gypsum stake, had previously indicated an unwillingness to sign on to the deal.