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
Premium Stock Stock market Norfolk Southern Railway
The Acquisition of Consolidated Rail Corporation 1. Why does CSX want to buy Conrail? How much should CSX be willing to pay for it? 1‚ If the CSX buys Conrail‚ this combination would create the second largest rail system in the United States and the largest rail system east of the Mississippi River. The new company would get the $8.5B in rail revenue and almost 70% of the Eastern Market‚ which means it would have monopoly position in the Eastern Rail Market. 2‚ The combined rail networks would
Premium Norfolk Southern Railway Stock market Stock
Restructuring (TB) Prof. Josè Neves de Almeida Q1. The rationale behind the intention of CSX to buy Conrail is mainly to anticipate a proposal from the other big player in the market Norfolk Southern. Both CSX and Norfolk Southern have basically the same routes and the latter company holds an advantage which is its capability to manage costs – more efficient. In case Norfolk Southern acquires Conrail‚ CSX will have serious problems to compete against them because they will have a wider range of
Premium Stock market Norfolk Southern Railway Takeover
acquisition? 3. What businesses should Newell be in? Should it acquire Sanford or Levelor? Acquisition of Consolidated Rail (A) (HBS 9-298-006) Study Questions 1. Why does CSX want to buy Conrail? How much should CSX be willing to pay per share? 2. Analyze the structure of CSX’s offer for Conrail a. Why did CSX make a two-tiered offer? What effect does this structure have on the transaction? b. What are the economic rationales for the various provisions of the merger agreement (no-talk
Premium Discounted cash flow Price Norfolk Southern Railway
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 freight
Premium Investment Stock market Finance
The Wreck of Amtrak’s Sunset Limited H. Richard Eisenbeis‚ Sue Hanks‚ and Bruce Barrett University of Southern Colorado On September 22‚ 1993‚ the Sunset Limited‚ the pride of Amtrak‚ glided swiftly along through the warm‚ fall night. A dense fog hugged the countryside. Because there was nothing to see through the train’s windows‚ many passengers dozed peacefully‚ lulled to sleep by the gentle‚ rhythmic‚ clickety-clack of iron wheels passing over jointed rails. Crewmembers roamed the aisles and
Premium Rail transport
Conrail Case Study 1. Why does CSX want to buy Conrail? Why can CSX justify paying a premium to acquire Conrail? 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-Conrail merger would result in more than $8.5 billion in revenues and nearly 70% of the Eastern market. The combined entity would
Premium Stock market Stock Mergers and acquisitions
2300 | 0.0750 | 16.78% | 16.03% | 90‚500‚000 | 0.35 | Total gain in Operating imcome (in million) | 1997 | 1998 | 1999 | 2000 | 2001 | Terminal value | CSX | 0 | 240 | 521 | 730 | 752 | 5620.90 | Norfolk Southern | 0 | 231 | 429 | 660 | 680 | 5375.29 | NPV(in million) | 1997 | 1998 | 1999 | 2000 | 2001 | Terminal | Total | CSX | 0 | 114.3997 | 212.6677 | 255.1742 | 225.1033 | 1682.557 | 2489.902 | Norfolk Southern | 0 | 111.5378 | 178.5319 | 236.7287 | 210.2153 | 1661.717 | 2398
Premium Stock market Stock Norfolk Southern Railway
Acquisition of Consolidated Rail – Case Study 1. Background Info - Conrail 1.1. Formed from the remains of the six bankrupt North-eastern railroads in 1973 1.2. Earned its first profit in 1981- $39.2m on revenues of $4.2bn. Privatised through an IPO in 1987 1.3. Major player in North-eastern cities and their connection with major Mid-western hubs 1.4. In 1995‚ had 23‚510 employees‚ operated 10‚701 miles of track and controlled 29.4% of the eastern rail freight market 1.5. Financial indicators-
Premium Stock market Stock Discounted cash flow
Industry Railroads CSX Corp. Conrail Inc. Rating: HOLD (Moderate Risk) Company Update Brian R. Routledge‚ CFA (212) 778-1501 CSX (46 1/2)—NYSE CRR (85 3/4)—NYSE CSX announces merger proposal with Conrail. Longer-term benefits balanced against near-term uncertainties. Lowered CSX rating to Hold given earnings dilution over the near-term. October 18‚ 1996 Earnings Per Share Fiscal Year Ending Shares P/E O/S Ind. 52Week 12/95 CSX 12/96E 12/97E
Premium Income statement Balance sheet Revenue