SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant / /
Filed by a Party other than the Registrant /X/
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/X/ Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c)
or Section 240.14a-12
CONRAIL INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NORFOLK SOUTHERN CORPORATION
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction applies:
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(3)Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11
(Set forth the amount on which the filing fee is calculated and state how
it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[ADVERTISEMENT]
CSX/CONRAIL OVERLAPPING COMMUNITIES
[Graphic: Box with map of Pennsylvania, Delaware, Mary-
land, Ohio, and parts of West Virginia, Michigan, Indiana,
and Illinois with names of cities with major rail service
only from CSX and Conrail]
WHERE WILL CONRAIL EMPLOYEES BE IF
COMPETITION DIES?
One look at this map shows why a combination with CSX isn't good for
Conrail employees.
The 60-plus communities on it are those with major rail service only
from CSX and Conrail. Indeed, CSX and Conrail run parallel from Ohio to
Philadelphia and elsewhere. At the same time, Conrail's major Hollidaysburg
and Altoona shops are within just 70 miles of CSX's facilities at Cumberland,
Md. Redundancies like these could add up to lost jobs.
The sheer size of a CSX/Conrail combination would dominate rail
transportation in the East, depriving shippers of the balanced competition
that promotes safe and efficient service--service that encourages economic
development and brings the marketplaces of the world to every shipper's
doorstep. Lack of competition means lack of growth--lack of rail business,
lack of train service, lack of maintenance: in short, fewer opportunities for
employees.
With this in mind, Conrail employees have every reason to support a
combination with Norfolk Southern. Norfolk Southern's system extends and
complements Conrail's system, rather than duplicating it.
Conrail employees want to be part of a winning future. Norfolk Southern
has the best employee safety record of any major carrier. The best operating
ratio. A world-class infrastructure. A reputation for innovation and
industrial development. It's why The Thoroughbred has been called one of
America's most admired companies.1
Norfolk Southern and Conrail can both boast overfunded, healthy pension
funds, ensuring peace of mind for retirees. CSX's claim to fame is its recent
recognition as one of the "Top 50 Companies with the Largest Underfunded
Pension Liability".2
CSX hasn't said much about these issues. It does not want to remind
Conrail employees that your system overlaps CSX. It doesn't want to remind you
that CSX/Conrail would create a virtual "no-competition zone" from eastern
Ohio to the Atlantic. And it certainly doesn't want to remind you that
Conrail's pension money could be merged with CSX's woefully underfunded
pension fund.
IT'S TIME TO ACT
If you're a Conrail employee, take action. Let your board of directors,
management, labor leaders and lawmakers know that you support jobs, growth,
opportunity, competition and a healthy pension fund.
If you own shares of Conrail, say NO to the CSX/Conrail deal by voting
at the stockholders' meeting December 23. Vote your shares AGAINST Conrail's
proposal to "opt out" of the fair value statute. If you are a participant in
the Conrail ESOP, instruct the ESOP Trustee to vote your shares AGAINST the
proposal.
ESOP participants should know that their votes are especially important
because each allocated share represents both a financial and voting interest
by the participants equivalent to at least five shares. This is because
allocated ESOP shares control the voting of both unallocated ESOP shares and
Employee Benefits Trust shares. And remember--your vote is strictly confiden-
tial.
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1 FORTUNE, Annual Corporate Reputations Survey, March 4, 1996.
2 Pension Benefit Guaranty Corporation: News Release 96-16,
December 6, 1995.
Employees should also know that a number of senior Conrail executives
have been selling Conrail shares not only pursuant to the CSX offer but also
in the open market. Does this manifest a lack of confidence in the value and
the chances of completion of CSX's proposed deal, which would have 75% of the
remaining Conrail shares converted into CSX stock in the back-end merger?
[NORFOLK SOUTHERN LOGO]
The Thoroughbred of Transportation
[Copyright] Norfolk Southern Corporation, Three Commercial Place, Norfolk, VA
23510-2191. http://www.nscorp.com
[NORFOLK SOUTHERN LOGO]
NORFOLK SOUTHERN CORPORATION
SHAREHOLDER PRESENTATION
NORFOLK SOUTHERN IS OFFERING CONRAIL SHAREHOLDERS SUPERIOR VALUE
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==========================================================================
NORFOLK SOUTHERN OFFER CSX OFFER
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o Nominal value of $110.00 per o Nominal value of $92.78 per
share share(3)
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o $8.0BN total value(4) o $6.7BN total value(2)
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o No equity risk -- all cash o Equity risk -- no voting trust,
75% stock
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o No regulatory risk -- voting o Regulatory risk for stock por-
trust tion
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o No synergy risk -- all cash o Synergy risk -- 75% stock
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o Immediate value o Timing of back-end exchange
uncertain
==========================================================================
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3 Based on 25% cash/75% stock, reflects CSX 12/2 closing price of
$46.875, represents discounts of 15.7% to Norfolk Southern
offer
4 For remaining shares
NORFOLK SOUTHERN'S OFFER IS ALSO SUPERIOR FOR OTHER CONSTITUENCIES
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EMPLOYEES
Safety: Norfolk Southern has established itself as the
safest railroad in terms of employee safety for
the past seven years
Better fit: Norfolk Southern's rail system has less
overlap and duplications, providing
greater opportunity for maintaining
employment
Pension funds: Norfolk Southern and Conrail have
overfunded pension plans; CSX has an
underfunded pension plan
SHIPPERS
Safety: Norfolk Southern has the lowest derailment
ratio in the industry, resulting in superior
service to customers
Service: Norfolk Southern is the most efficient
railroad, providing the highest level
of service to its shippers
Balanced competition: Norfolk Southern/Conrail would create
a more balanced competitive landscape in
the Eastern U.S.
Innovation: Norfolk Southern created innovative
ventures such as the Triple Crown
Intermodal Network using RoadRailer [trademark
symbol] technology
CONRAIL'S BOARD CAN SATISFY THE REMAINING CONDITIONS TO NORFOLK
SOUTHERN'S OFFER
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Satisfied
Condition Yes No Comment
Voting trust approval x Satisfied 11/18
condition pursuant to informal
nonbinding written
opinion by STB
HSR condition x Satisfied 11/18
pursuant to FTC
Premerger Notification
Office confirmation
Financing condition x Satisfied 11/15; over
$20.1 BN in commit-
ments received
Subchapter F condition x Conrail Board action
required
Rights condition x Conrail Board action
required
CSX termination condition x Conrail Board action
required
CSX'S OFFER -- MUCH LESS VALUE, REALLY HOSTILE TO SHAREHOLDERS
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Much less value Really hostile
Earliest o Hostile approach - coercive bid
Structure Amount receipt date
- ------------------------------------- o Hostile structure - multi-tier,
25% cash $110.00 Jan. 1997 front-end loaded
75% equity
(1.85619 $87.01(1) Jan. 1998(?) o Hostile back-end -- uncertain timing
shares) AND value on 75% of the bid
BLENDED VALUE: $92.78 o Hostile vote -- 5:00 p.m. the night
before Christmas Eve
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1 Based on CSX 12/2 closing price of $46.875
CSX'S OFFER NOW EXPOSES SHAREHOLDERS TO DOWNSIDE
RISKS FOR 75% OF CONSIDERATION
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o Regulatory risk
-- STB does not approve transaction
-- STB imposes conditions unacceptable to CSX and Conrail
o Timing risks
o Equity market risk
o Synergy risk
-- Synergy realization (gross number)
-- Synergy realization (net number; STB "give-ups")
<TABLE>
<CAPTION>
SIGNIFICANT REGULATORY RISK IS BORNE BY CONRAIL
SHAREHOLDERS IN THE CSX PROPOSAL
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"2-to-1" points comparison
Cities with over 100,000 population
NS/CR CSX/CR
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General General
merchandise merchandise
Cities Population(1) sales(1)($000s) Cities Population(1) sales(1) ($000s)
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<S> <C> <C> <C> <C> <C>
Erie, PA 280,600 $396,696 Baltimore, MD 2,465,700 $2,442.491
Fort Wayne, IN 470,400 545,487 Dayton, OH 957,100 1,471,145
Grand Rapids, MI 990,400 1,738,886
Indianapolis, IN 1,473,300 1,937,260
Philadelphia, PA 4,958,300 4,551,065
Pittsburgh, PA 2,399,600 2,526,381
Youngstown, OH 603,600 797,138
TOTALS 751,000 $942,183 13,848,000 $15,464,366
"SHIPPERS, PORTS, AND CONGRESS OPPOSE CONRAIL SALE TO AN UNEXPECTED EXTENT . . .
OPPOSITION IS LIKELY TO FORCE THE WINNING BIDDER INTO COSTLY CONCESSIONS, INCLUDING
SELLING ASSETS AND ROUTES."
</TABLE>
- -- The Wall Street Journal, November 27, 1996
1 Source: Rand McNally, Commercial Atlas & Marketing Guide, 127th edition
CSX'S OFFER -- FAULTY SYNERGY MATHEMATICS
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o EQUITY RISK: value of 75% stock is highly dependent on
synergies realized
o SYNERGY RISK:
CSX (year 2000) NSC (year 2000)
1st time $550 million $660 million
2nd time $730 million $660 million
3rd time ? $660 million
O STB RISK:
-- Market share dominance in CSX-Conrail transaction
-- Significant market overlap in CSX-Conrail transaction
-- Need for balanced competition
O Because we believe CSX must give up more track and revenue than
NSC, it is unlikely to have more synergies
-- CSX will have more losses from enhanced competition and
therefore less net revenue enhancements
-- CSX will have less track and revenue remaining and
therefore less operating savings opportunities
CSX'S OFFER EXPOSES SHAREHOLDERS TO DOWNSIDE RISKS WITH SIGNIFICANT
VALUE IMPLICATIONS ON BACKEND
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NO COMPLETION OF BACK-END EQUITY MARKET RISK
Back-end value $71.00 Back-end value $73.96
Discount to NS (35.0%) Discount to NS (32.8%)
all cash offer all cash offer
ASSUMPTIONS ASSUMPTIONS
o CRR reverts back to pre-CSX o Equity market (including CSX)
announcement price of $71.00 drops 15% before completion of
back-end exchange
o STB fails to approve or
approves on terms unacceptable
to CSX
YOU MUST VOTE "NO" ON OPT-OUT TO PROTECT THE VALUE OF YOUR SHARES
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NO VOTE
o Helps secure higher value for shares
o Sends important signal on shareholder rights
o Helps NS win
-- More immediate value
-- No up-front risk
-- No back-end risk
-- Superior transportation system
-- Superior equity investment opportunity
YES VOTE
o CSX wins despite
-- Delivering inferior value
-- Loading substantial risk on shareholders
-- Using coercive structure to squeeze out owners at a lower
price
Every vote counts -
To realize the benefits
available you must vote against
opt-out
