Consolidated Rail Corp Analysis

For calculations of the acquisition price, the P/E is taken to be 8.6. The acquisition price is calculated by multiplying this value with the historical average of net income. Thus, the acquisition price comes out to be $186,215,800, which is $189,186,673 less than the enterprise value.

The Norfolk and Sothern railway has been honored as the safest railway in the world. This railway has held the safety honor bell longer than any railway company. It has as many as twenty thousand route miles in twenty two states across the United States. Since the early 1800s there have been hundred maybe thousands of small railway companies, over time many of these small companies merged to create what is now known as the Norfolk and Southern railway. “Some of the small railway companies that merged to create this railway are “The Southern Railway and Norfolk and Western railway in 1982” (Norfolk and Southern Corp, 1).

Share Data Price - $58.40 Date – April 14, 2003 Target Price - $60.35 52 Week Price Range - $53.00 - $67.10 Market Capitalization - $ 64.644 Billion Shares Outstanding – 1.12 Billion Revenue - $31.272

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 competitive position in both long-haul and short-haul routes through cost reduction. The last reason for buying the Conrail was the fear of CSX Company to lose competitive advantage and as a result to lose a lot of revenue, if Conrail merge with

BNSF Railway Co. and Union Pacific Railroad are the major companies that are working in railroad development in the DFW area.

According to a recent survey, more than 81% of people want the new government to invest in rail infrastructure and as it’s a hot topic during the elections, there are possibilities of future investments in the rail industries.

4.89 4.31 4.11 4.05 4.65 4.93 5.37 5.49 4.9 4.02 Senior Secured Debt/EBITDA 3.51 3.31 3.34 2.75 2.56 2.87 3.31 4.11 4.66 4.14 3.40 EBITDA/Cash Interest 1.97 2.23 2.25 2.67 3.17 3.11 3.37 2.6 2.3 2.87 2.51 (EBITDA-CAPEX)/Interest 1.12 1.57 1.53 2.02 2.37 2.5 2.57 1.99 1.85 2.22 2.34 Covenant-lite volume ($ billion)

CP’s 6% pop reflects just how excited people are at the idea of a merger, even if there isn’t anything set in stone. If CP and NSC were to consolidate, the deal would lead to over 33,700 miles of track being created, improving connectivity between the U.S. and Canada and pandering to the increased production of oil and demand for other consumer goods.

According to 123jump.com, after seeing potential gains in such a low estimate of its initial stock price, analyst later valued the range of the initial price to be $42 to $45 a share.

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 market, and near monopoly control over Northeast. After merge, it would create the 2nd largest rail system in the U.S., as well as the largest rail system eastern of Mississippi River.

Proposal: The proposal of our team is in line with the offer proposed by Michael Dell and Silver Lake. Share price offered to shareholders was $13.75/share resulting in post deal leverage of 3.7x for Dell as a private company. Fund break-up is mentioned in the below table.

Rail transport has dominated the shipping industry since the early 19th century, when railways were first created. In response to a growing demand for large scale shipping the rail transport industry has continued to prosper. Throughout railway history there are a few key concepts regarding operations management; including: the design of goods and services, quality management systems, and competition within and outside of the industry.

RELATIVE VALUATION- ANALYSIS  Company has a higher EV/EBITDA multiple compared to peer group showing it to be undervalued. It also reflects in the value of share computed on lower side (3.5 USD)  A lower EV/EBITDA multiple (< 10) shows a matured industry with concentrated players evident in the company mix in major South American markets( Exhibit 1-5)  Price/Sales method showing a lower value due to vastly different operating margins of peer group and also

Focus: Features 7, 11, 12 and 13 provide the Railways with the focused market. The e- Commerce

This mode of transport is reliable and fast and one of the most important ways by which people and goods are transported. (Train History , 2017) Rail transportation is referred to as ‘movement of on guideways’ and rails are the most common guideways. However technological progress made monorails and magnetic levitation trains now available and although railways are a result of the industrial revolution, they have been affected by continuous innovations, technical, regulatory and commercial changes which have enhanced their capacity and efficiency. Therefore railway transport is important now as it was in the late 19th century. One innovation pertains to the quality of the rail infrastructure, particularly rail tracks (e.g. better steel, concrete ties), which regulates the operational characteristics of their use such as speed, permitted weight, maintenance and immunity towards the environment.