SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14D-1
(Amendment No. 14)
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. 14 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 11. MATERIAL TO BE FILED AS EXHIBITS.
Item 11 is hereby amended and supplemented by the following:
(a)(48) Text of Advertisement appearing in newspapers commencing
December 4, 1996.
(a)(49) Text of Presentation made to certain shareholders of the
Company commencing December 4, 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.
Dated: December 4, 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)(48) Text of Advertisement appearing in newspapers
commencing December 4, 1996.
(a)(49) Text of Presentation made to certain shareholders
of the Company commencing December 4, 1996.
[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.
- --------
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
- --------------------------------------------------------------------------
==========================================================================
NORFOLK SOUTHERN OFFER CSX OFFER
- --------------------------------------------------------------------------
o Nominal value of $110.00 per o Nominal value of $92.78 per
share share(3)
- --------------------------------------------------------------------------
o $8.0BN total value(4) o $6.7BN total value(2)
- --------------------------------------------------------------------------
o No equity risk -- all cash o Equity risk -- no voting trust,
75% stock
- --------------------------------------------------------------------------
o No regulatory risk -- voting o Regulatory risk for stock por-
trust tion
- --------------------------------------------------------------------------
o No synergy risk -- all cash o Synergy risk -- 75% stock
- --------------------------------------------------------------------------
o Immediate value o Timing of back-end exchange
uncertain
==========================================================================
- ------------------
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
- ---------------------------------------------------------------------
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
- --------------------------------------------------------------------------
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
- ------------------------------------------------------------------------
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
- --------------
1 Based on CSX 12/2 closing price of $46.875
CSX'S OFFER NOW EXPOSES SHAREHOLDERS TO DOWNSIDE
RISKS FOR 75% OF CONSIDERATION
- ------------------------------------------------------------------------
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
- ----------------------------------------------------------------------------------------------
"2-to-1" points comparison
Cities with over 100,000 population
NS/CR CSX/CR
- ----------------------------------------------------------------------------------------------
General General
merchandise merchandise
Cities Population(1) sales(1)($000s) Cities Population(1) sales(1) ($000s)
- ----------------------------------------------------------------------------------------------
<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
- ------------------------------------------------------------------------
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
- ------------------------------------------------------------------------
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
- ------------------------------------------------------------------------
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
