SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14D-1
(Amendment No. 36)
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. 36 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
to the Offer to Purchase, dated November 8, 1996 (the "First
Supplement"), and the Second Supplement to the Offer to Purchase, dated
December 20, 1996 (the "Second 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 First Supplement, the Second Supplement or the
Schedule 14D-1.
Item 10. Additional Information.
Item 10 is hereby amended and supplemented by the following:
(e) On January 9, 1997, Plaintiffs asked the District Court for
an injunction pending appeal which was denied. On the same date,
Plaintiffs filed a notice of appeal with the District Court.
On January 10, 1997, Plaintiffs filed a motion for expedited
appeal or, in the alternative, an injunction pending appeal with the Third
Circuit. On the same date, the Third Circuit set a briefing schedule to
consider Plaintiffs' motion for an injunction pending appeal but declined
to expedite the final decision on the appeal.
Item 11. Material to be Filed as Exhibits.
Item 11 is hereby amended and supplemented by the following:
(a)(85) Text of Speech made to the Council of Institutional
Investors on January 10, 1997.
(a)(86) Text of Advertisement appearing in newspapers commencing
January 10, 1997.
(g)(14) Motion for Expedited Appeal filed by Parent,
Purchaser and Kathryn B. McQuade against the Company,
CSX et al. (dated January 10, 1997, United States
Court of Appeals for the Third Circuit).
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: January 10, 1997
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
(a)(85) Text of Speech made to the Council of Institutional
Investors on January 10, 1997.
(a)(86) Text of Advertisement appearing in newspapers commencing
January 10, 1997.
(g)(14) Motion for Expedited Appeal filed by Parent, Purchaser
and Kathryn B. McQuade against the Company, CSX et al.
(dated January 10, 1997, United States Court of Appeals
for the Third Circuit).
REMARKS BY: DAVID R. GOODE
CHAIRMAN, PRESIDENT AND CEO
NORFOLK SOUTHERN CORPORATION
BEFORE THE: COUNCIL OF INSTITUTIONAL INVESTORS
WASHINGTON, D.C.
JANUARY 10, 1997
Good afternoon, and thank you for that introduction. I
welcome the opportunity to talk with you today. My topic ---
which obviously is the battle for Conrail --- is not only timely,
but also goes to the heart of the issues you deal with every day:
Corporate governance and accountability to shareholders.
My charge today is threefold: I will demonstrate the
superiority of Norfolk Southern's offer, show why Conrail
shareholders should vote a resounding "no" on January 17th, and
discuss issues involved in this situation that reach beyond
anyone's immediate economic interest --- even our own --- and
threaten the fundamentals of our corporate system.
Your "Shareholder Bill of Rights" observes that American
corporations "must be governed by the principles of
accountability and fairness inherent in our democratic system."
While most corporations adhere to those principles, events
surrounding the Conrail issue demonstrate the potential for real
problems of fairness or accountability to corporate owners.
That's readily apparent from the cavalier comment Conrail's
CEO gave The Wall Street Journal a while ago. Speaking about
Pennsylvania's anti-takeover statute, he said, "If you don't like
the law, don't buy the stock." While a very candid comment, this
is reminiscent of the days when railroad magnates like William
Henry Vanderbilt could snort, "the public be damned," and get
away with it.
But Vanderbilt added something else in 1882. After damning
the public, he still insisted, "I am working for my
stockholders." I ask you today --- when weighing the merits for
Conrail shareholders -- whether the days of the robber barons are
over when Conrail and CSX claim that their deal is a good one for
Conrail constituents.
Many in the investment community disagree with their claim.
As one Bear Stearns analyst observed, nowhere in Conrail's proxy
materials does it say that CSX's bid is in the shareholders' best
interests. Conrail's solicitation materials say only that the
proposal is in the company's best interests. This omission, the
analyst added, is unusual --- if not unprecedented.
To suggest that the proposed Conrail / CSX merger is good
for shareholders ignores reality. Indeed, it's a billion-dollar
plus falsehood --- the difference in the value of CSX's coercive,
front-end, two-tiered offer and Norfolk Southern's superior all-
cash proposal of $115 a share. As of today, the value gap for
the shareholders is $15 per share, reason enough to support our
bid.
Conrail's actions have consistently sought to thwart the
interests of shareholders.
Consider the lock-out provision, for example.
If the CSX / Conrail deal is so attractive to all
constituencies, why did they find it necessary to extend the
lock-out period from nine months to two years, preventing Conrail
from discussing any other offers until January 1, 1999? I submit
that CSX and Conrail are trying to coerce stockholders into
approving the transaction by portraying CSX as the only choice
available.
This raises serious questions. Why the unusually long
period? What does the long vacation time for the Conrail
directors do in the event of problems with the proposed
transaction? What if Norfolk Southern, the shippers or the
various states and regions that have expressed concern are
successful before the Surface Transportation Board? What happens
then to the interests of Conrail shareholders if the directors
have tied their hands? I'll let you decide.
In another move disclosed last week, CSX dumped 85,000
shares of Conrail in an attempt to avoid a requirement of the
Pennsylvania Fair Price law that would force them to pay at least
$110 per share for all remaining Conrail shares to investors who
demand it. Is this fair? Obviously not.
The issue of whether they can use Pennsylvania anti-takeover
laws against Conrail shareholders --- and at the same time avoid
compliance with the Fair Price provision --- is now before the
Federal Appeals Court. Successful or not, the attempt to use
Pennsylvania law to prevent Conrail shareholders from realizing
the highest price sends a real message about fundamental
fairness.
The Conrail "shareholders be damned" attitude permeates the
maneuvering. Consider the date Conrail originally set for a
special shareholder meeting to vote on a proposal that would
allow CSX to buy the additional shares it needs to gain control.
If you recall, it was planned for December 23rd --- two days
before Christmas --- at 5 p.m. no less. Furthermore, Conrail
said it would hold the meeting only if victory was certain. Does
that sound like an effort to enhance corporate democracy?
Fortunately, the courts told Conrail that it could postpone
the meeting only for reasons more substantial than fear of
defeat. As that date neared and defeat seemed imminent, CSX was
forced to sweeten its inferior bid in response to shareholder
complaints. The meeting to vote on the revised offer is now set
for next Friday.
Indeed, Conrail used this rescheduling to further
disenfranchise shareholders. While Conrail reset the meeting
date for its shareholder vote in hopes of gathering the necessary
support, they did not change the original record date. So,
unless you purchased stock in time to be a record holder on
December 5th, you cannot vote at the January meeting. CSX and
Conrail understand that they maximize their chances of success by
minimizing investor participation. While this may be acceptable
under the law, ask yourself again whether this is in the spirit
of encouraging corporate democracy.
It's clear to me that Conrail and CSX must believe that they
can succeed only by limiting the ability of shareholders to
participate in a crucial decision affecting the future of the
company owned by these shareholders.
Fortunately, Conrail cannot exclude all of its shareholders
from the decision process. The January 17th meeting still offers
a critical opportunity to express their distaste for Conrail's
abusive strategy.
By rejecting Conrail's proposal to allow the two-tier CSX
offer to proceed, Conrail shareholders can send a clear message
that the current offer is inadequate. They can urge CSX and
Conrail to work with Norfolk Southern to address their investment
needs in the context of our $115 all-cash offer. Only a loud-
and-clear rejection from Conrail shareholders will open Conrail
and CSX's eyes that a three-party, $115 solution is the only
solution.
Your "Shareholder Bill of Rights" makes the point. It says:
Shareholders "are entitled to participate in the fundamental
financial decisions which could affect corporate performance and
growth and the long range viability and competitiveness of
corporations."
Given the opportunity for real participation, I'm confident
Conrail shareholders would choose Norfolk Southern's offer.
That's because our offer is not only better for them, but also
for shippers, employees, and the public. We have pointed this
out before, but let's run through it again.
For shareholders, our all-cash offer has the highest value
and the lowest risk. It offers immediate and obvious benefits.
It will give current Conrail shareholders a premium of $15
per share, or 15 percent over the blended value of CSX's
proposal, based on yesterday s closing price for CSX stock. With
our offer, shareholders know the value they'll receive. They
don't have to guess.
Norfolk Southern shareholders will benefit, too. Through
improved operating efficiencies and market share gains, a Norfolk
Southern / Conrail combination will add significantly to earnings
per share. It will produce a growth rate nearly 50 percent
higher than we could have achieved on our own. The earnings
impact will be accretive following STB approval in the second
year, but will be accretive from a cashflow standpoint in the
first year.
All other constituencies --- from employees to shippers to
the public --- should prefer Norfolk Southern's offer.
A glance at the railroad map shows how Conrail employees
benefit. CSX's routes and facilities overlap Conrail
considerably. There's a lot of duplication. I wish Conrail
employees could hear the extensive list of yards and shops
presumably being considered for consolidation in the event of a
CSX purchase. Conrail and CSX overlap, which means redundancy.
For the most part, Norfolk Southern and Conrail do not.
From a job security standpoint, if I were in the safety
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 then duplicates --- the
Conrail system.
For shippers and Conrail-served communities, the choice
should be clear, too. Unlike a combined Norfolk Southern and
Conrail, CSX and Conrail would leave large, important areas ---
such as Philadelphia, Pittsburgh, Baltimore, and Youngstown ---
with a rail monopoly unless the Surface Transportation Board acts
to avoid it. Economic development and plant location experts
will tell you that growth will not be encouraged by limiting rail
service.
Conrail and CSX means market dominance in the East unless
the STB acts to prevent it. Consider this: 75 percent of the
electric generation capacity and almost 70 percent of Norfolk
Southern, CSX and Conrail total rail traffic would be controlled
by a single railroad unless the STB steps in to fix the problems.
Does this sound good to you for the general public and other non-
shareholder constituencies?
With Norfolk Southern, no such competitive problems exist.
There is virtually no overlap, and we have offered up front to
end the long quasi-monopoly Conrail has enjoyed in the New York
metropolitan area. This is relevant to Conrail shareholders
because it shows what a hard case Conrail and CSX would have
before the STB and how great the risks are in terms of the CSX
stock value they would get.
All told, a Norfolk Southern / Conrail combination is better
for competition, better for shipper service, better for
industrial development, better for economic growth, better for
job security, and better for the financial stability of the
employee retirement picture.
On this last point, let me suggest that Conrail employees
should want their strong and overfunded pension fund combined
with Norfolk Southern's overfunded pension fund. They should not
want it to become a part of CSX's, which a few weeks ago again
landed on the Pension Benefit Guaranty Corporation's list of most
underfunded pension funds.
I won't belabor the differences between the two offers.
You've studied them, and you know the merits of Norfolk
Southern's proposal. That's obvious from the letter your
organization wrote Conrail last month expressing concerns about
the fundamental fairness of the CSX deal to shareholders.
You are not alone in your criticisms. Institutional
Shareholder Services, a consultant to Conrail's largest
institutional holders, has also called CSX's bid "coercive and
unfair to shareholders" and advised their clients to reject the
proposed "opt out."
By voting against CSX's offer at next Friday's meeting,
shareholders can force one of two actions that will benefit them.
First, a vote "no" could force CSX to bump up their offer -
-- if, of course, they can afford to do so. Or second, by voting
no, shareholders could force Conrail and CSX to work out a
solution with us which incorporates our superior, all-cash offer
--- an offer that we have more than enough bank commitments to
fund.
The vote does make a difference. Look at what's happened.
From the outset, CSX and Conrail have dismissed Norfolk
Southern's offer as unreal --- a "non-bid," if you will --- a
phantom offer that could never be realized by the shareholders.
At the same time, CSX nominally increased its own offer by,
first, approximately $628 million on November 6, and then another
$870 million on December 19 --- a total of $1.5 billion dollars.
They know our offer is very real and our prospects are very good.
Believe me, they did not put an extra $1.5 billion on the table
in response to a phantom offer with low prospects of success.
Shareholders can influence the future of the company they
own by acting now and voting no. The other side will tell you
that the litigation should end this. Don't believe them. We're
in this strongly --- Norfolk Southern is not going away. We'll
pursue all legal options to succeed with Conrail, including the
Surface Transportation Board, which yesterday reminded everyone
that it does have the power to override a Conrail / CSX contract
and to approve an application from another party or make changes.
A "no" vote will have a powerful influence.
I know the dangers of believing one's own press, but in the
case of Conrail I'll make an exception. Experts are virtually
unanimous in their opinion that our all-cash offer is superior to
CSX's. They have concluded that CSX and Conrail are using every
trick in the corporate raiders' playbook to force a bad deal down
shareholders' throats.
The Wall Street Journal observed that "Conrail and CSX are
using arguably coercive takeover tactics reminiscent of the
1980s-style corporate raiders, exploiting a tough anti-takeover
law adopted to shield companies from such raiders."
Business Week said: "The 1989 anti-takeover law was designed
to thwart raids on local companies by foreign slice-and-dice
artists out to kill jobs for quick market gains. It was never
aimed at efficiency-driven bidders such as Norfolk Southern."
And Harvard Business School Professor Michael Jensen and
others have noted that CSX's two-tiered, front-end loaded deal is
"a classic maneuver in which you railroad people into taking a
deal they don't want."
Today, I thank you for your support and ask that you
continue to express your concerns. Tell the media, tell the
directors, tell the shareholders, tell the employees that you do
not want the CSX deal to become a template for other coercive
mergers down the line. And, of course, vote against the opt out
proposal.
Remind them that the battle for Conrail goes beyond the
companies involved, even beyond the future of the railroad
industry. It is about who owns a corporation, and the rights of
those owners. Insist that Conrail's shareholders be allowed to
decide for themselves which offer is best. This transaction may
well be a tactical textbook for years to come. If so, it's
important that the right moral be drawn from the lesson.
This transaction is not only important for Conrail
shareholders, Norfolk Southern, and the future of transportation
in our country, but also important for setting the tone for
corporate governance in the future. You --- and those who listen
to you --- have a heavy responsibility. I'm working as hard as I
can on this --- a lot of people are --- but we need your help.
With that, I will be happy to take your questions.
[Newspaper Ad]
TO PARTICIPANTS IN CONRAIL'S ESOP
NOW IS THE TIME TO ACT.
[Norfolk Southern Logo]
Dear ESOP Participant:
Say "NO" to the CSX/Conrail deal at the shareholders' meeting
scheduled for January 17. Instruct the ESOP Trustee to vote your
shares AGAINST the proposal to "opt out" of the Pennsylvania Fair
Value Statute and the adjournment proposal.
Your ESOP vote is very important because each ESOP share in your
account represents a significantly greater voting interest--by our
calculations, equal to at least seven shares. This is because your
instructions to the Trustee direct the voting of: 1) ESOP shares
allocated to your account, 2) ESOP shares not yet allocated to your
account, 3) any ESOP shares that are not voted, and 4) Employee
Benefits Trust shares.
Remember, the ESOP Trustee is required by law to keep your vote
confidential.
Here are three good reasons to instruct the ESOP Trustee to vote
AGAINST the "opt out" proposal.
1. LARGE REDUNDANCIES COULD ADD UP TO LOST JOBS
* There is substantially more overlap with a CSX/Conrail system
than there is with a Norfolk Southern/Conrail system.
* A merger between CSX and Conrail would eliminate competitive
services in 64 cities, including Philadelphia, Baltimore,
Youngstown and Pittsburgh.
* Conrail's Hollidaysburg and Altoona shops are within 70 miles
of CSX's facilities at Cumberland, MD.
2. NORFOLK SOUTHERN VALUES ITS EMPLOYEES
* Since the formation of Norfolk Southern in June 1982, we have
matched people to needs through attrition, voluntary
separation and early retirements and have avoided massive
layoffs and involuntary separations.
* Norfolk Southern is committed to maintaining a major
operating presence in Philadelphia, as we have done in
Roanoke, Virginia and Atlanta, Georgia -- major operating
centers for Norfolk Southern's two predecessor railroads.
* Norfolk Southern and Conrail have fully funded, healthy
pension funds, ensuring peace of mind for both employees and
retirees. CSX, on the other hand, was recently named again
as having one of the nation's 50 largest underfunded
pensions.1
* Norfolk Southern has the best employee safety record of any
major rail carrier.
3. NORFOLK SOUTHERN'S $115 ALL-CASH OFFER FOR CONRAIL SHARES IS THE
SUPERIOR OFFER
* Norfolk Southern's $115 all-cash, all-share offer--with
prompt payment through use of a voting trust--is worth 18%2
more than CSX's current deal.
Your vote is important. If you have already sent in Trustee
instruction card in response to the Conrail solicitation, you may
revoke it and vote AGAINST the proposals by signing and dating the
GREEN instruction card previously sent to you and mailing it to the
Trustee. It's the latest dated instruction card that counts. The
Trustee's deadline for receiving your instructions is January 15.
Sincerely,
NORFOLK SOUTHERN CORPORATION
SAY "NO" TO THE CSX/CONRAIL MERGER BY VOTING TODAY. INSTRUCT THE ESOP
TRUSTEE TO VOTE YOUR SHARES AGAINST CONRAIL'S AMENDMENT PROPOSAL AND
THE ADJOURNMENT PROPOSAL.
[Norfolk Southern Logo]
Important: If you have any questions, please call our solicitor,
Georgeson & Company Inc. toll free at 800-223-2064. Banks and brokers
call 212-440-9800.
1Pension Benefit Guaranty Corporation: News Release 97-09, 12/12/96.
2Based on closing price of CSX common stock on January 8, 1997.
January 10, 1987
IN THE UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
NO. _________
NORFOLK SOUTHERN CORPORATION, a Virginia corporation,
ATLANTIC ACQUISITION CORPORATION, a Pennsylvania
corporation AND KATHRYN B. McQUADE,
Appellants
v.
CONRAIL INC., a Pennsylvania corporation, DAVID M. LEVAN,
H. FURLONG BALDWIN, DANIEL B. BURKE, ROGER S. HILLAS,
CLAUDE S. BRINEGAR, KATHLEEN FOLEY FELDSTEIN, DAVID B. LEWIS,
JOHN C. MAROUS, DAVID H. SWANSON, E. BRADLEY JONES,
AND RAYMOND T. SCHULER AND CSX CORPORATION,
Appellees
On Appeal from the United States District Court for the Eastern District of
Pennsylvania
Civil Action No. 96-CV-7167
APPELLANTS' MOTION FOR EXPEDITED APPEAL OF
THE DISTRICT COURT'S JANUARY 9, 1997 ORDER DENYING THEIR
MOTION AND SUPPLEMENTAL MOTION FOR PRELIMINARY INJUNCTION
OR, IN THE ALTERNATIVE, FOR AN INJUNCTION PENDING APPEAL
DECHERT PRICE & RHOADS
Mary A. McLaughlin
George G. Gordon
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103-2703
(215) 994-4000
(215) 994-2222 Facsimile
SKADDEN, ARPS, SLATE, MEAGHER
& FLOM
Steven J. Rothschild
One Rodney Square
P.O. Box 636
Wilmington, DE 19801
(302) 651-3000
(302) 651-3001 Facsimile
APPELLANTS' MOTION FOR EXPEDITED APPEAL OF THE
DISTRICT COURT'S JANUARY 9, 1997 ORDER DENYING THEIR MOTION
AND SUPPLEMENTAL MOTION FOR PRELIMINARY INJUNCTION OR, IN
THE ALTERNATIVE, FOR AN INJUNCTION PENDING APPEAL
For the reasons set forth in the accompanying Opening Brief,
appellants/plaintiffs-below Norfolk Southern Corporation, Atlantic
Acquisition Corporation, and Kathryn B. McQuade hereby move for the
following expedited relief:
1. An Order requiring that appellees/defendants-below file and
serve responses to the accompanying Opening Brief by 5:00 p.m. on January
13, 1997 and that appellants/plaintiffs- below file and serve any reply
brief by January 14, 1997.
2. A decision on plaintiffs' appeal from the District Court's
January 9, 1997 Order denying their Motion and Supplemental Motion for
Preliminary Injunction before the currently scheduled January 17, 1997
shareholders meeting of Conrail, Inc. based on the attached Opening
Brief, defendants' response thereto, plaintiffs' reply, if any, and oral
argument.
3. In the alternative, if the Court does not agree to expedite the
treatment of the final decision as requested above, plaintiffs request
that it adopt the briefing schedule outlined above in connection with
their motion for an injunction pending appeal and, for the reasons set
forth in the accompanying Opening Brief, request that this Court enjoin
defendants, and all persons acting in concert with them or on behalf of
them are enjoined from holding any meeting of Conrail's shareholders at
which the shareholders will be asked to take any action regarding rights
they may have under Subchapter 25E of the Pennsylvania Business
Corporation Law, including any right to opt-out of Subchapter 25E,
pending final resolution of plaintiffs' appeal of the District Court's
January 9, 1996 Order denying Plaintiffs' Motion and Supplemental Motion
for Preliminary Injunction.
Plaintiffs' counsel has talked with defendants' counsel and
informed them that plaintiffs are seeking the expedited briefing schedule
set forth above.
Respectfully submitted
Mary A. McLaughlin
George G. Gordon
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103
(215) 994-4000
(215) 994-2222 (facsimile)
Attorneys for Appellants
Of Counsel:
Skadden Arps, Slate
Meagher & Flom (Delaware)
Steven J. Rothschild
Andrew J. Turezyn
Karen L. Valihura
(Id No. 54269)
R. Michael Lindsey
One Rodney Square
P.O. Box 636
Wilmington, DE 19899-0636
(302) 651-3000
Dated: January 10, 1997
