THE VIRGINIAN-PILOT
Copyright (c) 1997, Landmark Communications, Inc.
DATE: Tuesday, January 14, 1997 TAG: 9701140216
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY CHRISTOPHER DINSMORE, STAFF WRITER
LENGTH: 68 lines
Intensifying its efforts to woo Conrail Inc. shareholders, Norfolk Southern Corp. said it will buy 9.9 percent of the Philadelphia-based railroad's stock if CSX Corp.'s offer for Conrail is rejected in a Friday shareholder vote.
Norfolk Southern's offer is a $943 million carrot for shareholders that increases the immediate value of the Conrail stock. If the CSX offer is turned down, Norfolk Southern will pay $115 a share for about one of every eight Conrail shares outside shareholders own.
CSX has bought 19.9 percent of Conrail's stock, or nearly two of every 10 outstanding shares.
The shareholder vote could be postponed by a U.S. Circuit Court until it hears Norfolk Southern's appeal of a decision last week that allowed the CSX/Conrail merger agreement to prohibit Conrail from talking to other potential buyers until 1999.
Norfolk Southern can buy up to 9.9 percent of Conrail's stock without triggering a Conrail anti-takeover defense known as a ``poison pill.'' If anyone buys 10 percent or more of Conrail's stock without its approval, the pill floods the market with Conrail shares, which would make Norfolk Southern's bid prohibitively expensive.
``It underscores Norfolk Southern's determination to see this battle through and get a fair value for Conrail shareholders,'' said Norfolk Southern Chairman David R. Goode in a statement.
Norfolk Southern said a defeat of the proposed merger with CSX would trigger an effort to unseat Conrail directors at the next annual meeting.
``Today's announcement by Norfolk Southern changes nothing,'' CSX and Conrail said in a joint statement issued late Monday. ``The fact is the CSX-Conrail merger is the only transaction where Conrail shareholders can receive value for 100 percent of their shares.''
Norfolk Southern has been battling for Conrail since October, when CSX and Conrail announced their merger. Whoever wins Conrail will become the dominant freight railroad in the East.
CSX is offering $9.3 billion - a mix of cash and stock worth about $103 a share. Norfolk Southern's cash bid of $115 a share is worth $1 billion more.
Norfolk Southern got support Monday for its effort to defeat the CSX merger proposal from a firm that advises major shareholders and a small New York investment firm.
Institutional Shareholder Services has again recommended that its clients oppose the CSX deal in the vote Friday. The Bethesda, Md., firm serves large investors such as insurance companies and pension plans.
Pete Gleason, a senior analyst at the firm, said he expects Conrail's board would agree to sit down with Norfolk Southern if shareholders vote against the CSX merger despite barriers that prohibit it from doing so.
``Conrail shareholders would be facing a pretty angry group of shareholders if they didn't talk to Norfolk,'' he said.
Wyser-Pratte & Co. Inc., a New York firm that owns 385,200 Conrail shares, launched an effort Monday to amend Conrail's by-laws to allow shareholders to review the board's decision to use anti-takeover defenses such as poison pills.
Wyser-Pratte, which has led similar efforts, hopes to amend the by-laws at the next annual meeting, which has historically been held in May.
With the current anti-takeover provisions ``Conrail is effectively disenfranchising its shareholders and eviscerating their basic property rights,'' said Guy Wyser-Pratte, the firm's president.
``There is an offer out there for $115 (a share) and they're trying to ignore it,'' Wyser-Pratte said. ``We're not going to let them to do that.''
Conrail shares surged $2 1/2 Monday to $103 each in New York Stock Exchange trading. CSX was up 3/8 to $44 3/8 a share and Norfolk Southern rose 1/2 to $89 a share.
KEYWORDS: CONRAIL CSX NORFOLK SOUTHERN MERGER