（1）CSX wants to buy Conrail for three primary reasons:
firstly, buying Conrail would generate synergies by increasing revenue while reducing costs through consolidation of overlapping operations; secondly, the deal would strength CXS-Conrail’s market position while simultaneously weakening Norfolk Southern’s; and, similarly, CSX seeks to preempt another company’s potential bid for Conrail for fear that they would lose market share themselves. In order to gauge the amount CSX would be willing to pay to acquire Conrail, we used both comparative and DCF analyses. The Stagger’s Rail Act of 1980 has created a deregulated environment in which acquisitions are used to improve the competitive positioning of existing companies within the railroad industry. CSX is interested in Conrail for a couple of reasons. Primarily, CSX would like to acquire Conrail because its routes are complementary to their own, allowing the combined company to provide “long-haul, contiguous, and therefore low-cost service between the Southern, Eastern, and Mid-Western parts of the United States.” Additionally, CSX’s acquisition of Conrail would prevent the company’s main competitor Norfolk Southern from gaining access to routes in the Northeastern United States. This would leave Norfolk Southern at a large strategic disadvantage. Lastly, the combination would provide cost synergies and reductions, even on the shorter haul trips, that would far exceed those of Norfolk Southern in aggregate measures. Contrarily, it was also suggested by an analyst that the merger was a result of fear. Essentially, it was said that CSX was concerned that Norfolk Southern would make a bid first, thus achieving a first mover advantages and getting the same benefits that CSX itself would from the merger, effectively degrading CSX’s competitive positioning within the industry. Whether the deal was motivated by fear or strategic positioning, the merger will improve the competitive positioning of CSX, ultimately...
Please join StudyMode to read the full document