Essay on Conrail Case

913 Words Jan 11th, 2011 4 Pages
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 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 is willing to pay $92.84 per share.

2. Analyze the
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As the material (Harvard Business School, 9-298-006, July 2005) tells, would CSX together with the management and the employees trust control 35,5% for the shares, and therefore would they only need 14,6% to vote in favor of the opting-out, so it would pass. Then afterward would it be possible for CSX to acquire the additional 20,3 % due to the first tier second stage, and then could their proceed with the back-end offer for the remaining 60%. As mention earlier, because CSX choose to offer two different prices to Conrails shareholders, were they required to do the first tier in two stages.

3. As a Conrail shareholder, would you tender your shares to CSX at $92.50 in the first-stage offer? Why or why not?

Consolidated Rail – Case B
4. Why did Norfolk Southern make a hostile bid for Conrail?

Due to the (Harvard Business School, 9-298-095, May 2001) Norfolk Southern expresses its concern about a merger between CSX and Conrail. It would have significant consequences on Norfolk Southern way of doing business. They could be excluded from important markets. As a broker says letting the CSX Contrail merger pass could mean the end of doing business for Norfolk Southern. We believe that this is the main reason, but Norfolk Southern can also see synergies inform of both cost savings and increasing revenues.

5. In a bidding war, what should each bidder be willing

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