INTERNAL MEMORANDUM TO: Norfolk Southern FROM: Date: October 15‚ 1996 Re: Regarding our Hostile Bid for Conrail Rail Corporation Today‚ CSX Corporation(CSX) and Consolidated Rail Corporation (Conrail) announced an $8.3 billion merger‚ the first and third largest railroads in the Eastern United States. This merger would create the second largest rail system in the United States in the United states‚ and the largest rail system east of the Mississippi river by far. This merger has huge implication
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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 profit. Another argument that is mentioned in the materials is that CSX want to do the merger‚ before another company tries. CSX doesn’t want Norfolk southern to get Conrail. CSX
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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 connections and they will continue to
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was passed and in effect deregulated the industry. Consolidation continued into the 1990s with two billion dollar deals occurring in the Western United States: Burlington Northern acquired Santa Fe Pacific in 1995 and Union Pacific acquired Southern Pacific in 1996. CSX wants to buy Conrail in order to better position itself in the market as Conrail was well diversified and offered intermodal service which included truck trailer‚ rail cars‚ container shipping and barging as well as
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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 | 2398.731 | Case 2 Memo Team name: Leopard Team member: Chia-Yu Liou‚ Tzu-Yu Liu‚ Haoxin Guan‚ Siqi Hu 1. What is the per share value of Conrail to Norfolk Southern? To CSX
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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 in from Norfolk Southern‚ a competitor in the
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1 The Acquisition of Consolidated Rail Corporation 1. CSX wanted to merge with Conrail‚ because the consolidated company would have more than $8.5 billion in rail revenue and almost 70 % of the Eastern market. Gain in Operating Income from Cost Reduction would bring additional $370 million by the year 2000. Total gain from revenue increase would result in additional $180 million. And from the operating income would reach $550 million. Another important point in CSX-Conrail merger is the better
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$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 facilitate long-haul‚ contiguous‚ and‚ therefore‚ low-cost service between the Southern ports‚ the Northeast‚ and the Midwest. 3‚ In the short-haul routes between the Midwest and the South‚ CSX-Contrail would become more competitive through cost reduction. When I calculate the price which CSX is willing to pay for Conrail. There
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merger (560 million dollars) and the Southern Pacific merger (660 million dollars) but it is substantially higher than the Chicago and Northwestern merger (250 million). Also in terms of projected synergies as a percent of the Target´s Operating Expenses I believe that the projection of the CSX-Conrail merger is reasonable as its value is lower than its comparables – 14.69% compared to 22.3% (Santa Fe Pacific)‚ 27.7% (Chicago and North Western) and 24.5% (Southern Pacific). As we do not have any projection
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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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