ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Tuesday, November 5, 1996 TAG: 9611050068
SECTION: BUSINESS PAGE: B-6 EDITION: METRO
SOURCE: GREG EDWARDS STAFF WRITER
MEMO: ***CORRECTION***
Published correction ran on November 6, 1996.
Norfolk Southern Cor0p. has commitments for $15 billion from banks to
finance its proposed purchase of Conrail Inc. common stock. A story on
Tuesday's Business page gave an incorrect figure.
Rail rivals Norfolk Southern Corp. and CSX Corp. said Monday they have agreed to talk about the possibility of splitting Conrail routes after one of them merges with the Philadelphia-based freight railroad.
CSX - confident it's going to win the battle for Conrail - said it was talking with NS about the possible sale of part of a merged CSX-Conrail to NS. Both NS, based in Norfolk, and CSX, with headquarters in Richmond, said the other had asked for the talks.
Also Monday, NS reported that both Conrail and CSX have agreed to postpone a financial maneuver by Conrail planned for Thursday. It was designed to block anyone but CSX from merging with Conrail. Conrail's board revealed the decision in U.S. District Court in Philadelphia, where NS was seeking a temporary restraining order, blocking the planned maneuver, commonly referred to as a ``poison pill.''
On Oct. 15, CSX and Conrail jointly announced they had reached an agreement for CSX to acquire Conrail for a combination of cash and CSX stock worth about $8.4billion. Norfolk Southern, on Oct. 24, countered with a hostile $100-per-share cash offer for Conrail worth $9.1billion.
Speculation followed Monday's announcement about the talks between NS and CSX that NS was abandoning its fight for Conrail. In reaction, NS Chairman David Goode assured Wall Street that NS is ``fully committed'' to its bid for Conrail.
NS said it has received commitments from banks for more than $15 million to fund its takeover attempt. Both NS and CSX are interested in Conrail for its near monopoly of rail routes serving lucrative Northeastern markets.
``Our willingness to talk to CSX at its suggestion is consistent with my previously announced position that Conrail cannot be acquired by either CSX or NS without a plan to maintain a balanced competitive structure for Eastern railroad service,'' Goode said.
Goode said that while NS and CSX are willing to talk about splitting up Conrail, there's ``no reason to believe that Conrail is willing to accept that reality.''
CSX said its merger agreement with Conrail requires both it and Conrail to approve any sale of merged assets. ``No agreements have been reached [with Norfolk Southern] and there can be no assurance that any agreements will be reached,'' CSX said.
The announcement of talks between NS and CSX came as no surprise, said Renee Johansen, a railroad analyst with Wheat First Butcher Singer in Richmond. ``There's certainly room for some kind of deal or sale to be negotiated,'' she said.
Rail industry observers have long thought that Conrail would be split between NS and CSX, Johansen said. What routes and what track they get matter more to CSX and Norfolk Southern than which of the two winds up with the biggest chunk of Conrail, she said.
Before Goode reassured investors Monday that NS is committed to its bid for Conrail, the price of Conrail stock dropped to as low as $87, down $8.25 from its close on Friday. Conrail closed Monday at $93.62 1/2, down $1.62 1/2; NS closed at $90.75, up $1.37 1/2; and CSX closed at $44.87 1/2, up $1.87 1/2. All three stocks are traded on the New York Stock Exchange.
LENGTH: Medium: 67 linesby CNB