SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-1
(AMENDMENT NO. 7)
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
CONRAIL INC.
(NAME OF SUBJECT COMPANY)
NORFOLK SOUTHERN CORPORATION
ATLANTIC ACQUISITION CORPORATION
(Bidders)
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS)
(Title of Class of Securities)
208368 10 0
(CUSIP Number of Class of Securities)
SERIES A ESOP CONVERTIBLE JUNIOR
PREFERRED STOCK, WITHOUT PAR VALUE
(INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS)
(Title of Class of Securities)
NOT AVAILABLE
(CUSIP Number of Class of Securities)
JAMES C. BISHOP, JR.
EXECUTIVE VICE PRESIDENT-LAW
NORFOLK SOUTHERN CORPORATION
THREE COMMERCIAL PLACE
NORFOLK, VIRGINIA 23510-2191
TELEPHONE: (757) 629-2750
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidder)
with a copy to:
RANDALL H. DOUD, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
TELEPHONE: (212) 735-3000
This Amendment No 7 amends the Tender Offer Statement on Schedule
14D-1 filed on October 24, 1996, as amended (the "Schedule 14D-1"), by Norfolk
Southern Corporation, a Virginia corporation ("Parent"), and its wholly owned
subsidiary, Atlantic Acquisition Corporation, a Pennsylvania corporation
("Purchaser"), relating to Purchaser's offer to purchase all outstanding
shares of (i) Common Stock, par value $1.00 per share (the "Common Shares"),
and (ii) Series A ESOP Convertible Junior Preferred Stock, without par value
(the "ESOP Preferred Shares" and, together with the Common Shares, the
"Shares"), of Conrail Inc. (the "Company"), including, in each case, the
associated Common Stock Purchase Rights, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated October 24, 1996 (the
"Offer to Purchase"), as amended and supplemented by the Supplement thereto,
dated November 8, 1996 (the "Supplement"), and in the revised Letter of
Transmittal (which, together with any amendments or supplements thereto,
constitute the "Offer"). Unless otherwise defined herein, all capitalized
terms used herein shall have the respective meanings given such terms in the
Offer to Purchase, the Supplement or the Schedule 14D-1.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDERS.
Item 5 is hereby amended and supplemented by the following:
(b) On November 12, 1996, David R. Goode, Chairman, President and
Chief Executive Officer of Parent, presented a speech to the Salomon Brothers
Transportation Conference discussing, among other things, Parent's view that
the Offer and the Proposed Merger are superior to the Proposed CSX
Transaction. On the same date, Parent issued a press release synopsizing this
speech. A copy of the text of the speech and the press release are filed as
exhibits hereto.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
Item 11 is hereby amended to add the following:
(a)(38) Text of speech made to the Salomon Brothers Transportation
Conference on November 12, 1996.
(a)(39) Text of material entitled "2 to 1 Comparison" which may be
distributed to certain shareholders.
(a)(40) Press Release issued by Parent on November 12, 1996.
SIGNATURE
After due inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is
true, complete and correct.
November 12, 1996
NORFOLK SOUTHERN CORPORATION
By: /s/ JAMES C. BISHOP, JR.
Name: James C. Bishop, Jr.
Title: Executive Vice President-Law
ATLANTIC ACQUISITION CORPORATION
By: /s/ JAMES C. BISHOP, JR.
Name: James C. Bishop, Jr.
Title: Vice President and General Counsel
EXHIBIT INDEX
Exhibit
Number Description Page
(a)(38) Text of speech made to the Salomon Brothers
Transportation Conference on
November 12, 1996.
(a)(39) Text of material which may be distributed
to certain shareholders.
(a)(40) Press Release issued by Parent on
November 12, 1996.
EXHIBIT (a)(38)
11/12/96: 9:30 a.m.
REMARKS BY: DAVID R. GOODE
CHAIRMAN, PRESIDENT AND CEO
NORFOLK SOUTHERN CORPORATION
BEFORE THE: SALOMON BROTHERS TRANSPORTATION
CONFERENCE
NEW YORK, NEW YORK
NOVEMBER 12, 1996
Good afternoon, and thank you, Jim, for that
introduction. As you can easily guess, it has never been a
greater pleasure to participate in this conference. Much as
I d like to think it s my speaking prowess -- or the solid
story Norfolk Southern has to tell -- we all know better.
You want to hear about it. I want to talk about it. So
let's get on with it.
The it, of course, is Conrail. All of you know that
last week Norfolk Southern increased its offer for Conrail
to $110 per share -- all in cash. That demonstrates our
resolve and the importance we affix to this issue. It is
our long-held belief that a combination of Norfolk Southern
and Conrail is in everyone's best interest.
In my time this afternoon, I'll outline for you why our
offer is best for shareholders, best for shippers, best for
employees, and best for the general public. I'll describe
exactly how our offer is superior to that of CSX Corporation
in all those respects, and in one more: A Norfolk Southern
/ Conrail combination will preserve competition in our
industry. A CSX / Conrail combination would restrain it.
Let's start with Conrail shareholders. For them, our
$10 billion cash offer has the highest value and the lowest
risk. It offers immediate and obvious benefits.
Our offer will give Conrail shareholders a premium of
$17, or 18 percent over the blended value of CSX's 40
percent cash and 60 percent stock proposal, based on
yesterday's closing price for CSX stock.
Our offer provides for shares to be purchased into a
voting trust, providing immediate cash payment to
shareholders. With our offer, shareholders know the value
they ll receive. They won't have to guess.
And our offer -- unlike 60 percent of CSX's offer -- is
not contingent on regulatory approval, which could force
shareholders to wait until late next year or longer to
receive an as yet undetermined total value from CSX.
While I've taken the trouble -- and your time -- to
outline these facts, I really don't think you needed the
reminders. It's just crystal clear that -- for Conrail
shareholders -- our offer is better. Given a fair chance,
I'm confident they ll make the right choice.
Norfolk Southern shareholders will benefit from our
offer, too. Through improved operating efficiencies and
market share gains, a Norfolk Southern / Conrail combination
will add significantly to earnings per share, resulting in a
growth rate more than 50 percent higher than we might have
achieved on our own. The earnings impact will be accretive
in the second year of the combination but will be accretive
from a cashflow standpoint in the first year.
We have the financial ability to make this deal work.
We have the financing done -- and over-subscribed. We have
the balance sheet that makes such a strong transaction for
our shareholders possible -- and we have the willingness to
do it. This is an opportunity for our shareholders, and Hank
Wolf and Bill Romig have shown the results in detail in our
presentations.
Our shareholders support this transaction, as they
should. It will create a strong, efficient rail system for
us, but one which will not be anti-competitive. We intend to
make this work for our shareholders -- not with the monopoly
of the other combination -- but with the competitive edge
that talented Norfolk Southern and Conrail people will bring
to the table. They will deliver the kind of performance that
will benefit not only our shareholders, but also shippers.
So, the Norfolk Southern / Conrail transaction is best
for shareholders of both companies.
Conrail employees should vastly prefer our offer, too.
They should want our deal. A quick glance at the rail
system map shows why. CSX's routes and facilities overlap
Conrail considerably. There's a lot of duplication. You know
what has to happen there. Competitive solutions, sure, but
also redundancies. I wish Conrail employees could have heard
the conference call last week with analysts. If they had,
they would have heard the list of yards and shops being
considered for consolidation. From a job security
standpoint, if I were in the steel-toed shoes of a Conrail
employee, I'd welcome Norfolk Southern with open arms. I'd
welcome a merger with a company whose physical plant extends
and complements -- rather than duplicates -- the Conrail
system.
At the same time, I'd be concerned about my retirement.
I'd want my overfunded Conrail pension fund to be combined
with Norfolk Southern's overfunded pension fund. I would
not want it anywhere close to CSX s, which had been on the
Pension Benefit Guarantee Corporation's list of Ten Most
Underfunded Pension Funds.
Shippers should also support a Conrail-Norfolk Southern
merger. A combined Norfolk Southern will increase
competition in the transportation industry, while a CSX
merger will result in extreme market dominance.
The math is simple. Today, Norfolk Southern and CSX
have a competitive balance, with about 45 percent and 55
percent shares, respectively, of their combined business.
CSX and Conrail, however, would grab a lopsided almost 70/30
split over Norfolk Southern.
A combined CSX / Conrail would control 98 percent of
the Class 1 track in Maryland, 73 percent in Ohio, 99
percent in Pennsylvania, 78 percent in West Virginia and 100
percent in Delaware.
Important markets -- from New York to Northern New
Jersey to Boston to Baltimore to Dayton to Indianapolis,
Philadelphia, Pittsburgh, Wilmington and Youngstown -- would
be left with just one carrier. Market dominance would exist
across every industry sector. I can't believe -- although
CSX and Conrail might wish otherwise -- that our Eastern
rail system can stand this kind of market dominance. I can't
predict STB decisions, but I do believe public policy
requires strong, competitive rail service in the East.
Consider New York. Compare the lack of growth of the
Port of New York during the years that Conrail has enjoyed a
service monopoly here with the phenomenal growth of the Port
of Hampton Roads, which is served by both Norfolk Southern
and CSX. Industrial development and economic growth suffer
when there is no competition at and between large markets.
Would we really risk places like Baltimore, Philadelphia and
Pittsburgh going to single rail service?
Some might say -- and I certainly would if necessary --
Well, we ll have to fix the anti-competitive parts. Maybe
so -- but why not go for the Norfolk Southern alternative
that does not start with an anti-competitive combination
that has to be fixed? The Conrail board, even if it is
tempted to go for a dominant combination, should stop and
consider the regulatory risk that they are asking 60 percent
of their shareholders to bear.
In an anti-competitive scenario, it's not difficult to
picture the ghost of re-regulation rising from the dead to
again haunt our industry. That's not in anybody's interest.
Not Conrail s, not CSX's and not ours. I'm dedicated to
making every effort to avoid that spectre.
Norfolk Southern and Conrail will produce a balanced
split, and we have indicated our willingness to structure
our combination to reduce the difference even further.
Norfolk Southern will provide for real competition in the
East.
Our bid encourages a balanced competitive structure for
Eastern railroad service with two rail systems of comparable
size and scope. It acknowledges that large markets must be
served by more than one railroad; that ownership of major
trunk lines and effective terminal access are required for
true competition; and that competition is weakened when less
than fair value is paid for assets.
A Norfolk Southern / Conrail combination will promote
growth in the global marketplace by removing artificial
barriers to traffic flows at home. Norfolk Southern
customers, for example, will obtain better access to the
Northeast and improved single system coverage in the East.
Conrail customers will obtain better access to the
Southeast.
We will provide a level of service that only a broad
network can achieve. We will be able to improve intermodal
service between the Northeast and Southeast, making our
intermodal network more competitive with alternative truck
services. That's healthy not only for shippers, but for the
motoring public on our clogged and crumbling highways. This
combination can and will produce growth and develop new rail
markets.
Our competitors have worked hard to suggest that their
proposed merger would be a merger of equals. In the media
recently, they seemed to be knocking Norfolk Southern for
offering superior transportation service and for posting
excellent financial results.
The goal, of course, was to instill fear that we will
shake up the status quo by pushing hard to continue those
traditions once we acquire Conrail. If that scares anyone,
they have every reason to be afraid. We will make changes --
good ones -- changes that will provide growth and
opportunity for both Conrail and Norfolk Southern employees
and for our shippers throughout the land. That's the credo
Norfolk Southern believes in -- that's how we post results.
We will be a worthy competitor while continuing to work
toward our vision to be the safest, most customer-focused
and successful transportation company in the world.
We welcome competition, because we thrive on it. As
most of you know, our third quarter earnings once again set
records and marked 15 consecutive quarters of year-over-year
growth in earnings per share. Our operating ratio remains
the best among major U.S. railroads.
Our infrastructure is world-class, and we have the
resources to maintain and improve Conrail's track,
structures and equipment.
Year after year, Norfolk Southern has been the safest
major carrier. We continue to earn recognition for quality
and innovation. Our dedication to service was acknowledged
recently when Ford Motor Company awarded us a 12-year
contract to distribute new vehicles to dealers through a
network of mixing centers. This network will enable Ford to
reduce delivery times and save inventory costs for its 21
North American assembly plants. When the network is fully
operational in 1998, Norfolk Southern expects to increase
its motor vehicle business with Ford by 60 percent and enjoy
a significantly higher automotive revenue stream.
With Conrail as our partner, we won't rest on successes
like this. We will build on them.
CSX and Conrail have told the financial community that
their deal makes sense -- that it is best for all parties
involved. If so, why push it through in a coercive way.
Before buying the CSX line, you need to ask:
Why does CSX want to buy up to 20 percent of Conrail
shares prior to the special meeting at which shareholders
will vote on a change to the company's charter?
Why give CSX an option to purchase 16 million shares at
$92.50?
Why provide a 180-day lockout period, or for that
matter, under their revised tender, to extend the lockout
period until July 12, 1997?
Why cook up a poison pill with a dead hand provision
that cannot be taken down even by a board willing to
exercise its fiduciary responsibilities?
Why allow for breakup fees that are significantly
greater than breakup fees in other deals of this size?
And why deny Conrail shareholders an opportunity to
select the offer that is best for them?
You in the financial community know why these tactics
are being employed. There has been considerable recent
publicity about that. It is our hope that you will use your
good judgment and influence to support Norfolk Southern in
our purchase of Conrail.
Leaving aside the fine print, as a practical matter,
only three conditions stand in the way of our proceeding.
The Conrail board of directors would normally have the power
to meet these conditions. None requires a shareholder vote
to permit Conrail's owners to accept Norfolk Southern s
superior offer.
The first condition is that Conrail lift the poison
pill for Norfolk Southern, as it has for CSX.
Second, Conrail should stop hiding behind the provision
of the Pennsylvania statute that precludes a statutory
merger with a shareholder owning more than 20 percent of the
company without advance approval.
And third is that the proposed deal with CSX be
terminated.
All three conditions could easily be met by Conrail s
directors, except to the extent that they have tied their
own hands in the agreement with CSX. If they will respond
to the will of the shareholders, those shareholders could
reap the economic benefits of Norfolk Southern's offer.
I hope that you -- as members of the financial
community serving the investing public -- will let the
public, let the directors, and let the shareholders know
that you support us. Let them know you are troubled that
the CSX / Conrail plan could be pushed through, depriving
Conrail shareholders of the best offer. Tell them you don t
want to see this deal become a template for other coercive
mergers down the road. And let them know that a like it or
lump it posture is unacceptable. Arrogant statements from
Conrail management such as, If you don't like the law,
don't buy the stock, are more reminiscent of 1882 when
William Henry Vanderbilt snorted: The public be damned.
At this point, I'll be happy to take your questions.
Please understand if I am unable to respond in complete
detail due to the constraints of our legal action. I'm told
that attorneys for CSX and Conrail advised their clients not
to join you today. My attorneys told me to go ahead and
have a good time.
2 TO 1 COMPARISON
A Norfolk Southern-Conrail combination will create a
stronger, more competitive transportation market in the East
and a far more balanced freight rail system than the
proposed CSX/Conrail merger. Norfolk Southern will preserve
competitive rail service in dozens of cities currently being
served by two railroads. A merger between CSX and Conrail
would reduce competition, eliminating competitive service in
64 cities, including Philadelphia, Baltimore, Youngstown,
and Pittsburgh -- cities now served by both CSX and Conrail.
CSX also has refused to address the issue of competition in
major markets or to fix the egregious market dominance that
would result from a CSX/Conrail combination.
The following is a comparison under both merger scenarios of
2 to 1 points -- cities that now have competitive service
from two railroads that would receive service from one after
a merger and small railroads that would lose competitive
connections to the national rail network:
NS/CR CSX/CR
CITIES OVER 100,000
POPULATION (IN 1990) Erie, PA Baltimore, MD
Fort Wayne, IN Dayton, OH
Grand Rapids, MI
Indianapolis, IN
Philadelphia, PA
Pittsburgh, PA
Youngstown, OH
TOTAL "2-TO-1" 38 64
CITIES
TOTAL "2-TO-1" 1 18
SHORTLINES
11/12/96
2 TO 1 STATIONS
There may be additional cities which are not 2-1 but who have 2-1
customers.
Includes cities where NS and CR are the only railroads, or there is a
shortline without direct connection to another Class I. Does not include
stations on shortlines that become 2-to-1 stations.
NS/CR CSX/CR
DELAWARE DELAWARE
None Newark
Wilmington (multiple
stations)
ILLINOIS ILLINOIS
Normal Momence
INDIANA INDIANA
Alexandria Crawfordsville
Altamont (Lafayette) Greencastle
Butler (not mini-mill) Indianapolis (multiple
stations)
Claypool Porter
Fort Wayne Shelby
Hartford City St. John
LaPorte
Muncie
Red Key
Wabash
Warsaw
MARYLAND MARYLAND
None Aberdeen
Baltimore (multiple
stations)
Halethorpe
Sparrows Point
MICHIGAN MICHIGAN
None Carleton
Grand Rapids (multiple
stations)
Wayne
Wyoming
NEW YORK NEW YORK
Brocton None
Dunkirk
Ripley
Silver Creek
Westfield
OHIO OHIO
Avon Lake Ashtabula Harbor
Bucyrus Bellaire
Fairlane Cheshire
Findlay Cuyahoga Falls
Geneva Dayton
Lewis Center Elyria
Madison Galatea
Mentor Girard
Mortimer Goodman
N. Findlay Grafton
Oak Harbor Haselton
Painesville Kanauga
Perry Lordstown
Sandusky Miamisburg
Saybrook Middletown
Vermillion Niles
Wickliffe N. Warren
Willoughby Parma
Worthington Ravenna
Sidney
Struthers (MVRY)
Upper Sandusky
Warren
Youngstown (multiple
stations)
PENNSYLVANIA PENNSYLVANIA
Erie (EEC) Beaver Falls
North East Bessemer (URR)
Braddock (URR)
Brownsville
Brownsville Jct.
Chambersburg
Chester
Darby
Hays
Homestead (URR)
Johnstown (C&BL)
Koppel
Lurgan
McKees Rocks
Monongahela
Munhall (URR)
New Castle (ISS)
Philadelphia (multiple
stations)
Pittsburgh (multiple
stations)
Wampum
WEST VIRGINIA WEST VIRGINIA
None Charleston
Point Pleasant
Rivesville
SHORTLINE CONNECTIONS SHORTLINE CONNECTIONS
East Erie Commercial Ashland Railway
Canton Railway
Conemaugh and Black Lick RR
Delaware Valley Railway
Gettysburg Railroad
Grand Rapids Eastern RR
Indiana and Ohio RR (Mason
Line)
ISS Rail
McKeesport Connecting RR
Maryland and Pennsylvania RR
Mahoning Valley Railway
Patapsco and Back Rivers RR
R.J. Corman - Cleveland Line
Southwestern Pennsylvania RR
Union RR
Vaughan RR
Youngstown and Trumbull RR
Yorkrail
FOR IMMEDIATE RELEASE
November 12, 1996
News Media Contact: Robert C. Fort
(757) 629-2714
GOODE CALLS ON SHAREHOLDERS, INVESTMENT COMMUNITY TO
SUPPORT NORFOLK SOUTHERN'S OFFER
NEW YORK, NEW YORK -- Norfolk Southern Chairman, President
and Chief Executive Officer David R. Goode today called on
Conrail shareholders and the investment community to make
their voices heard in support of Norfolk Southern's all-cash
$110 per-share offer to purchase Conrail.
Addressing the Salomon Brothers Transportation
Conference, Goode said that a combination of Norfolk
Southern and Conrail is in everyone's best interest, adding
it's just crystal clear that shareholders of both
companies would benefit from Norfolk Southern's superior
offer.
Goode said that Norfolk Southern and Conrail people
together will deliver the kind of performance that will
benefit not only our shareholders, but also shippers.
Goode said three conditions stand in the way of Norfolk
Southern proceeding with its offer, all of which could
easily be met by Conrail's directors, except to the extent
that they have tied their own hands in the agreement with
CSX.
Those conditions are: First, that Conrail lift the
poison pill for Norfolk Southern, as it has for CSX;
second, that it stop hiding behind Pennsylvania law, and
third, that it terminate its proposed deal with CSX.
Goode urged the investment community to speak up to
Conrail directors, shareholders and the public in support of
Norfolk Southern's offer.
Let them know that you are troubled that the CSX /
Conrail plan could be pushed through, depriving Conrail
shareholders of the best offer, Goode said. Tell them you
don't want this deal to become a template for other coercive
mergers down the road, and let them know that a like-it or
lump-it posture is unacceptable.
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