Executive Summary Conrail has received two acquisition bids from CSX and Norfolk Southern. Introduction Conrail and CSX‚ the nation’s first and third largest railroads‚ have decided to participate in a merger of equals. CSX has offered to acquire Conrail in a two tiered deal. The first 40% of tendered Conrail shares will be bought at a price of $92.50 while the remaining 60% will be acquired through a stock swap at a ratio of 1.8561921 (CSX:Conrail). In the midst of this offer‚ a hostile Bid comes
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Case Study for CSX Trisha Brown Averett University Jacksonville Florida based CSX Corporation‚ along with its subsidiaries leads as one of the top transportation providers. Services that CSX offers is traditional rail services and transportation of containers and trailers as well as trucking and logistics services. CSX was started 32 years ago as a result of the 3 major railway companies that consisted of Baltimore & Ohio (B&O)‚ Chesapeake & Ohio and Richmond‚ Fredericksburg
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1. Why does CSX want to buy Conrail? How much should CSX be willing to pay? After passing the Stagger’s Rail Act of 1980‚ railroad companies had possibility to close the unprofitable lines‚ determine the price and make mergers with other companies. Right after these drastic alterations‚ key measure of profitability analysis‚ which is operating ratio‚ decreased significantly from 93.3% to 80.0 %. Overall‚ efficiency in this sector increased‚ and railroads again turned to be competitive against the
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1. What is CSX’s motive for buying Conrail? • Synergy effect with lower cost The merged company could consolidate overlapping operations and reduce cost. CSX estimated that cost reduction would yield an additional $370 million in annual operating income by the year 2000‚ net of merger costs. • Expansion of market share by extending railroad network Railroad industry is a mature market. The only option to grow is through acquisitions. In 1995‚ Conrail owned 29.4% of the Eastern rail
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Restructuring 2 Valuation in a Bidding-War Context Copyright ©2002 Ian H. Giddy Corporate Financial Restructuring 3 Case Study: The Acquisition of Conrail Why merge Conrail and CSX? How was the CSX offer structured? How was Conrail’s resistance to an unfriendly bid structured? How would you‚ as a Conrail shareholder‚ react to the offer? What’s Conrail worth? Copyright ©2002 Ian H. Giddy Corporate Financial Restructuring 4 Gains from Conrail Acquisition? Rationale: Firm A should merge
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Perspective: Conrail shareholder. 1. Why does CSX want to buy Conrail? How much should CSX be willing to pay? Some of the reasons why CSX wants to buy Conrail are‚ to increase the consolidation in the Railway industry. Further consolidation typically means lower cost for the consolidators fx because economies of scale and synergies and …. A consolidation also results in lower competition inside the industry‚ which typically follows with higher‚ or at least not lower‚ prices and therefore higher
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CONRAIL CASE Question 1.a) Based on the information provided in the “A” case and especially in the Exhibit 7 the most that CSX should pay for Conrail should be $93.42 per share (calculations are attached hereto as Exhibit 1). I assumed that the correct or required discount rate to be used in the DCF analysis should be the CSX’s cost of equity which is 15.93%. Based in this analysis – which reflects the expected synergies arising from the deal - CSX could still justify an increase in its offer by
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Conrail G455: Corporate Restructuring Team 7 1) Why does CSX want to buy Conrail? In an industry beset by limited options to consolidate domestic rail traffic‚ CSX looked at Conrail as an avenue to increase market share and gain access to the North East rail network. With air travel‚ road travel and trucking taking an increasing share‚ significant revenue growth became difficult. As Conrail became profitable‚ Congress explored ways of privatizing it‚ giving CSX an opportunity to acquire Conrail
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more likely to pay a higher cost. Quality is key. Starbucks has to maintain strict quality controls in its coffee sourcing as well as in its customer service and peripheral products to justify its costs. Differentiation Starbucks also spends a lot of time and energy differentiating itself from the competition. You can see this in the design of its coffee shops‚ the music played there and the types of products it sells‚ such as coffee-brewing equipment and jazz CDs. Starbucks makes sure to keep current
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What Does the Library Have to Offer There are many benefits when it comes to using the Ashford University Library; the Ashford University Library is a digital library that a student can access at any time of the day. It is also a scholarly resource. Like a public library a user has access to books‚ magazines journals and multimedia. The difference between a library and the Ashford University Library is that all the books‚ magazines‚ journals and multimedia have been converted into digital formats
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