The Acquisition of Consolidated Rail Corporation (A)  Questions:  1

The Acquisition of Consolidated Rail Corporation (A) 

Questions: 

1. Why does CSX want to buy Conrail? How much should CSX be willing to pay for it? 

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 and the takeover implications of the various provisions in the merger agreement (i.e., no-talk clause, lock-up options, break-up fee and poison pill shareholder rights plan)? 

3. As a Conrail shareholder, would you tender your shares to CSX at $92.50 in the first-stage offer?

The Acquisition of Consolidated Rail Corporation (B) 

Questions: 1. Why did Norfolk Southern make a hostile bid for Conrail? 

2. How much is Conrail worth? In a bidding war, who should be willing to pay more, Norfolk Southern or CSX? 

3. Why does CSX refer to Norfolk Southern’s bid as a “non-bid”? What should Norfolk Southern do as of mid-January 1997? 

4. As a shareholder, would you vote to opt out of the Pennsylvania antitakeover statute? What do the capital markets expect will happen? 

5. What are the costs and benefits of regulating the market for corporate control through statutes such as Pennsylvania’s antitakeover law?