Railroads Discussing Post-Merger Plans
RICHMOND, Va. (AP) _ Two railroads that have made bids to buy Conrail Inc. said they are talking to each other about their proposals.
CSX Corp., which made the first offer to buy Conrail, said it was considering selling rail lines or routes to Norfolk Southern Corp., which put in a higher bid for Conrail.
``There would only be one carrier after the merger where there are now two,″ Vance Richardson, a spokesman at CSX headquarters in Richmond, said Monday. ``We’re committed to granting competitive access to maintain two-rail competition.″
David R. Goode, chief executive officer of Norfolk-based Norfolk Southern, said the company remained committed to its offer to buy Conrail.
``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.
``While I am heartened by CSX’s willingness to discuss these matters, we have no reason to believe that Conrail is prepared to accept that reality,″ he said.
Conrail spokesman Rudy Husband declined to comment.
In Philadelphia, a federal judge denied Norfolk Southern’s request for a temporary restraining order to prevent Conrail from implementing a ``poison pill″ defense plan.
U.S. District Judge Donald W. Van Artsdalen acted after Conrail lawyers said the defense plan would not be implemented before a Nov. 12 hearing on Norfolk Southern’s effort to block the CSX-Conrail merger.
Conrail’s poison pill would allow Conrail shareholders to buy additional shares at a 50 percent discount. That would make it impossible for Norfolk Southern to acquire Conrail, said Norfolk Southern attorney Steven J. Rothschild.
Stanley Yorsz, representing Conrail, told the judge that the Conrail board met Monday and voted not to distribute the additional shares before the Nov. 12 hearing.
CSX started the bidding for Conrail last month, offering a combination of cash and stock initially valued at $8.4 billion. But after CSX’s stock price fell, the offer declined in value to about $8 billion.
Norfolk Southern countered with a cash bid of $9.15 billion.
Steven Lewins, an analyst with Gruntal & Co. in New York, said the talks between CSX and Norfolk Southern came as no surprise.
``This is a situation where everybody wins,″ Lewins said.
If CSX and Norfolk Southern agree to divide Conrail, they could become the two dominant railroads in the East, he said. By the turn of the century, they could merge with the West’s dominant railroads _ Union Pacific and Burlington Northern _ to create two strong transcontinental freight carriers, he said.
Norfolk Southern operates a 14,400-mile rail system in 20 Southeast and Midwest states, as well as a trucking company and a natural resources development company.
CSX operates more than 18,000 miles of track in 20 states in the East, Midwest, South and Ontario, Canada. Its Sea-Land Service division operates 105 container ships that produced 38 percent of the company’s revenues last year.
Conrail operates an 11,000-mile freight network in 12 Northeast and Midwest states, and Quebec, Canada.