A topic that may have never been honestly discussed before is the management and employee relations of the Soo Line after the Milwaukee Road merger, and the Wisconsin Central spinoff.
Big mergers and large line sales usually change who is in charge and the way they think about the employees.
What actually happened to the management of the Soo Line between 1985 and 1987?
Did they get more desperate to reassemble the company as the CP Rail management hovered over them with more consolidation plans?
Dennis Cavenaugh was President and CEO of the Soo Line from the time of the failed Spine Line bid (won by C&NW) until CP bought full control of the Soo Line in 1990. To understand what was happening at the Soo Line during this period you have to understand the state of the rest of railroading in the Upper Midwest at each moment in time.
If the Soo had won control of the Spine Line at the judge’s sale in the CRI&P bankruptcy the entire Upper Midwest railroading scene might look very different today. But they bid too little and argued too weakly against C&NW. Soo was content for a period of time after losing the Spine Line bid, but did begin to accumulate a cash hoard against the expected battle for the MILW. Once it became clear that the Trustee was not going to be able to reorganize the slimmed down MILW 2, and particularly once the Grand Trunk presented its bid the Soo made its initial move.
The parent CP was aware of Soo Line’s actions but you must remember they did not control the Soo as they only had 56% ownership stake. CP did not have a majority of the BOD. Grand Trunk quickly was out of the running as they were cash poor and there was little potential savings available to them from the merger consolidation, and parent CN wasn’t very strong either. After the second round of raises in the binding war Soo looked to have a slight edge as they offered more cash for the purchase, plus they would have more cash left to actually make the merger work.
The C&NW bid had more non-cash considerations such as tax benefits to the survivng Chicago Milwaukee Corp. However C&NW made a third even higher bid that Soo Line refused to match. Soo Line requested only trackage rights over the Spine Line to reach Kansas City. In the end the Federal Bankruptcy Judge didn’t believe the C&NW could live up to the terms of their third offer and so rejected it and accepted Soo Line’s se
One of the few instances in the bankruptcy context where a nominally higher bid price was rejected ! I believe there was some subsequent litigation about that - such as the creditors who thought they would get more in a C&NW purchase transaction instead - objected and appealed the judge’s decision. So, there might be a reported opinion on all that, but I don’t have a citation or reference to it handy - perhaps someone else here does ?
The decision was appealed by the creditors and others, and resulted in a decision by the Federal 7th Circuit Court of Appeals, Matter of Chicago, M. St. P. & P, 799 F2d 317 (7th Cir., 1986). I don’t normally recommend that people read court decisions, but I recommend this one. The appeals court obviously had nothing but contempt for the lower court decision, which shows in its acidic comments about the lower court’s disregard of the CNW’s higher bid and the court’s setting
I believe that the C&NW’s third bid was retracted even before the court adjourned for the day after the judge awarded the MILW to Soo Line. I think they realized that they had got caught up in the bidding process and their offer was too generous. Also the Soo Line made sure to close the deal before midnight on the same day as the judge’s decision to make it extremely difficult to reverse the decision. I wonder what would have happened if the C&NW had won the MILW and then wound up in bankruptcy while the UP was purchasing the MKT and WP, and was not in a strong position to buy the C&NW, perhaps some form of dismemberment with a different ownership layout than today?
As a very minor member of Soo management at that time I was able to watch all this going on and wonder where we would end up. The Spine Line would have been an interesting addition to the Soo at that time but I’m not sure they were really serious about wanting it or thinking they needed to get to Kansas City. This is based on remarks made later by senior staff at Soo about the value of getting there once they got the Milwaukee.
I remember watching Milwaukee Road stock prices plummet and looking back and kicking myself for not buying when it was about $2. When the deal closed in 85 it was near $200. Ah, hindsight.
After the completion of the deal, we started to get to know our new Milwaukee brethren and I was able to get a set of the in house cartoons that one of their engineering staff had been producing during the bankruptcy and acquisition period. Mark Barens was a gifted artist with a sly view of the goings on.
Of course, once we won the bid, we woke up and realised what we had bought. This starts another whole series of events for Soo from trying to rebuild one property while spinning off another, big daddy from the north trying to decide whether to keep you or sell you, getting rid of the KC line, buying it back plus some, etc.
I was wondering what influence and communication that the Canadian Pacific had between 1987 and 1992 with everyone working at the new SOO.
Was the new SOO-MILW combination too big or too expensive to manage at first in 1985? There had to be some problems because they had to delay their order of GM-EMD SD60 Diesels until 1987 for some reason.
I don’t remember enough of the timing specifics, unfortunately, but while we were pursuing the Spine Line, then the Milwaukee, up north they were starting to think more sreriously about their little operation they had owned 56% of since forever. Their position had always been hands off, other than one or two board seats.
After we got the Milwaukee the struggle began to rebuild the Chicago-La Crosse-St Paul corridor at the expense of the Chicago-Fond du Lac-Minneapolis corridor. You then saw the establishment of Lake States while there were thoughts of selling the Soo outright, making it employee owned or taking full ownership.
Lakes States was eventually set up as a sort of little sister and it then got bought.
CP took full ownership of Soo and completed the rebuild of the old Milwaukee line. It wasn’t until the late 80’s or early 90’s that you started to see any real presence from up north. I got a Canadian Assistant DE in 1992 and then we did a major reorg in 94 which involved all of the people on both sides of the border and several more Canadians came down.
As to the SD-60’s, I was on the track side so they didn’t let me play with those things.
I was on the “inside” of C&NW at the time, although I wasn’t involved in all of the strategic decisions. One thing you (and a lot of others) may not know is that the judge had signalled that he was probably going to award the MILW to the Soo some time before he actually did so. As such, CNW management had time to consider in advance what they would do if the judge really picked Soo… While I wasn’t party to this decision, management obviously decided that, if this happened, they would fold their tent and withdraw the CNW bid. So, when it actually happened, CNW was in a position to immediately put into effect the deciision they had already made for this contingency. Had the judge not signalled his intentions in advance, it is doubtful that CNW would have been able to respond as quickly as it did.
I also should point out that CNW’s final bid was highly controversial within CNW. There were a whole lot of insiders who felt CNW should not have submitted this bid and that it would be a disaster for the railroad if the judge accepted it. Suffice it to say that CNW’s president at the time (Jim Wolfe), who was a pretty savy guy, was not among the doubters. I never discusse