THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Saturday, October 21, 1995 TAG: 9510210280
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY CHRISTOPHER DINSMORE, STAFF WRITER
LENGTH: Medium: 58 lines
Speculation has resurfaced that Norfolk Southern Corp. is about to buy Conrail Inc. in a railroad megamerger.
Business Week magazine reports in its Oct. 30 edition that the word on Wall Street is that the Norfolk-based railroad is poised to buy Conrail for up to $90 a share, or nearly $7.5 billion.
Norfolk Southern came close to buying Philadelphia-based Conrail last year. Conrail's board opted to remain independent for the ``immediate future,'' the company said at the time.
Both railroads declined to comment on the latest report.
Rumors have persisted that Norfolk Southern and Conrail would get together. The two railroads would be a good fit: Conrail with its tracks in the Northeast, and Norfolk Southern with its connections in the Southeast and Midwest.
The stock market yawned in response to Business Week's report. In New York Stock Exchange trading Friday, Conrail's stock slipped 1/2 to $70 a share and Norfolk Southern's was up 1/8 to $76 5/8 a share.
Railroad analysts believe there's some substance to the tenacious rumors.
There have been several big railroad mergers in the past year. Two western giants, Burlington Northern Inc. and Santa Fe Pacific Corp., just completed their merger in September. Union Pacific Corp. is attempting to swallow Southern Pacific Rail Corp. to create a second western rail powerhouse.
Consolidation in the industry will continue until the turn of the century, when there will likely be two or three major transcontinental railroads, said Renee Weaver, a transportation stock analyst with the Richmond brokerage firm of Wheat First Butcher & Singer.
Norfolk Southern would face a good deal of opposition to a purchase of Conrail, primarily from CSX Corp., Weaver said.
``Before Norfolk Southern would make a move on Conrail, they would probably be working out the details with CSX behind the scenes.''
A combined Norfolk Southern/Conrail would likely sell some lines and have to grant CSX access to some Northeast markets to clear opposition by the Richmond-based transportation conglomerate, analysts suggest.
Some analysts have suggested that Norfolk Southern and CSX could carve up Conrail, splitting its assets in a deal creating two big eastern railroads. Norfolk Southern may be better poised than CSX to buy Conrail because it clearly has the stronger balance sheet. Norfolk Southern also may have more to gain in terms of routes. CSX already operates over some of the routes Norfolk Southern would gain from Conrail, such as access to New York.
Weaver said personalities and agreeing on a price acceptable to Conrail shareholders may be the only thing slowing down the deal.
Conrail has made clear that it desires to stay independent, ``but everybody has their price,'' she said. by CNB