SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14D-1
(Amendment No. 4)
Tender Offer Statement Pursuant to Section 14(d)(1)
of the Securities Exchange Act of 1934
and
SCHEDULE 13D
(Amendment No. 6)
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 amends the combined Tender Offer Statement on
Schedule 14D-1 initially filed on February 12, 1997, as amended, and the
Schedule 13D initially filed on February 5, 1997, as amended (the
"Combined Statement"), 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 February 12,
1997 (the "Offer to Purchase"), and in the related Letter of Transmittal
(which, together constitute the "Second Offer"). Unless otherwise defined
herein, all capitalized terms used herein shall have the respective
meanings given such terms in the Offer to Purchase or the Combined
Statement.
Item 5. Purpose of the Tender Offer and Plans or Proposals of the Bidder.
Item 5 is hereby amended and supplemented by the following:
On February 24, 1997, Mr. Goode sent a letter to Messrs. LeVan
and Snow outlining Parent's proposal for a comprehensive settlement of
the issues confronting the eastern railroads. The text of the letter is
filed as an exhibit hereto and is incorporated herein by reference.
Item 11. Material to be Filed as Exhibits.
Item 11 is hereby amended and supplemented by the following:
(a)(14) Revised Text of Information which may be sent to
certain Company shareholders.
(a)(15) Press Release issued by Parent on March 3, 1997.
(a)(16) Text of Letter sent by David R. Goode, Chairman,
President and Chief Executive Officer of Parent,
to David M. LeVan, Chairman, President and Chief
Executive Officer of the Company and John W. Snow,
Chairman, President and Chief Executive Officer of
CSX on February 24, 1997.
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: March 4, 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)(14) Revised Text of Information which may be sent to certain
Company shareholders.
(a)(15) Press Release issued by Parent on March 3, 1997.
(a)(16) Text of Letter sent by David R. Goode, Chairman, President
and Chief Executive Officer of Parent, to David M. LeVan,
Chairman, President and Chief Executive Officer of the
Company and John W. Snow, Chairman, President and Chief
Executive Officer of CSX on February 24, 1997.
[Exhibit (a)(14)]
CR+NS
THE BETTER CHOICE
Norfolk Southern s acquisition of Conrail is the last chance to
assure that there will be balanced, competitive rail
transportation in the East and the service reliability and
quality that competition assures. With many experts predicting a
final round of rail consolidation, it is essential that
competition in the East be maintained and strengthened.
RAILROAD MERGERS -- A NATURAL TREND
Railroads have been merging almost since the first trains ran in
the United States. A common theme has run through the industry s
mergers right from the start. By combining, railroads could serve
more customers more efficiently with broader networks and provide
better service to those customers.
Driven by globalization of trade and customer demand that
transportation providers serve even larger territories and offer
more complete and better service, railroad consolidation in
recent years has spurred the creation of large carriers that
operate extensive networks throughout several regions of the
United States.
From approximately 40 Class I railroads that were in business in
1980 when the industry was deregulated, mergers have shrunk the
roster to today s five giant systems. The West is blanketed by
two companies, Union Pacific and Burlington Northern Santa Fe,
while three carriers, Conrail, Norfolk Southern and CSX
Transportation, cover the East. History reveals that current
efforts to acquire Conrail should come as no surprise.
CR+NS -- TRANSPORTATION EXCELLENCE
History does not teach that all mergers are equal in benefit or
harm. Some mergers are better than others. CR+NS will be
superior to a CSX/CR combination in many ways.
For three of the past four years, Norfolk Southern was America s
Most Admired Railroad in FORTUNE s Corporate Reputations
Survey. Overall, in the 1997 results Norfolk Southern ranks
among the top 10% of the more than 430 companies rated. Norfolk
Southern will bring this excellence in quality of service and
employees, financial soundness, community and environmental
responsibility, and other factors to the CR+NS combination.
Customers throughout the northern U.S. will gain the benefits of
Norfolk Southern intermodal expertise. Norfolk Southern s
intermodal traffic has grown at twice the industry rate in the
last decade and reflects Norfolk Southern s expertise and
interest in shorter haul intermodal traffic. Every intermodal
unit handled by CR+NS is one more long haul truck off
northeastern highways.
While railroads now dominate the long haul movement of truck and
container freight, over-the-road truckers still prevail in short
haul markets. CR+NS will change that. Rail intermodal traffic
generally is competitive with trucks on hauls of 750 miles or
more, but NS is competitive on hauls as short as 500 miles.
Norfolk Southern will extend its bimodal Triple Crown service
into new markets as well.
CR+NS will bring to employees and communities the benefits of a
consistently aggressive and successful industrial development
department. Norfolk Southern s economic development efforts, in
conjunction with the states and communities it serves, located 8
of the last 11 new auto assembly plants on Norfolk Southern.
CR+NS will open markets throughout the eastern U.S. to more
efficient single line service. For example, paper movements from
plants in the Southeast to northeastern markets will benefit.
Improved car utilization for clay shippers with movements to the
Northeast will result from elimination of interchange
inefficiencies.
Extensive new direct, through services will be created. CR+NS
will create a lot of new and faster carload services by using the
best routes and best yards of the combined company.
New service will link Conrail points with Kansas City. The NS
route bypasses congested terminals in both Chicago and St. Louis.
New carload service will operate down the Eastern Seaboard,
providing direct service between Philadelphia, Wilmington and
Baltimore and the Southeast. Another new carload service will
operate directly from the Northeast to the Southeast on a
shorter, faster route than the current I-81 corridor. Traffic
that now moves the long way around via Cincinnati in joint line
service now will follow these direct routes, saving both time and
mileage.
CR+NS will bring to the Northeast rail operations that
consistently have a lower ratio of operating expenses to revenue
than any other major railroad. This efficiency is achieved
through the dedication and discipline of Norfolk Southern
employees. Conrail employees will become part of a system with
the best safety record in the industry and that is widely
regarded as the best-run and most efficient railroad.
Conrail and CSX facilities overlap in 60 communities, and
Conrail s major Hollidaysburg and Altoona, Pa., car and
locomotive shops are just 70 miles from CSX s facilities at
Cumberland, Md. With far less overlap, CR+NS is likely to see far
fewer job losses.
Basically, CR+NS are an end-to-end merger with fewer competitive
problems than a CSX/CR merger creates.
Balanced competition will stimulate even greater economic
activity in the region, resulting in more growth opportunities
and job creation under CR+NS.
CR+NS -- BALANCED COMPETITION
Unlike the competing CSX/CR plan, CR+NS is pro-competitive.
Putting substance to its Principles of Balanced Competition,
Norfolk Southern is committed as part of its merger plan to
assure competitive balance throughout the region by transferring
lines to competitors. Norfolk Southern and CSX already compete
vigorously throughout the Southeast and much of the Midwest,
although CSX is the larger railroad. Conrail, created by the
federal government in 1976 following the bankruptcy of six
eastern railroads, has a virtual monopoly in the vital New York
market, and dominates other parts of the Northeast.
A merger of Conrail with either NS or CSX would create an
unbalanced rail transportation environment throughout the East
unless steps are taken to restore the balance. CSX/CR would
dominate rail transportation with almost 70% of the market by
revenue; without a competitive remedy the CR+NS market share
would be approximately 61%. Norfolk Southern will take positive
steps to remedy the imbalance.
WHAT IS BALANCED COMPETITION?
Balance is not merely the act of changing colors of lines on a
map. Competitive balance is a combination of market share,
geographic coverage, market access and commodity diversity.
That is the situation that prevails in the West. Union Pacific
and Burlington Northern Santa Fe both go just about everywhere
and are comparable in size, although UP is slightly larger.
Neither is dependent on a single commodity for its future.
Balance assures that neither western carrier is in a position to
dominate the rail transportation market and reduce competitive
options for freight shippers.
In the Southeast, CSX and NS long have competed on relatively
equal terms. CSX enjoys broader geographic coverage and a 55%
market share, but NS is more profitable. As an independent
carrier, Conrail acts as a neutral in the Northeast, even
though it competes with NS and CSX in the Midwest. Today, both NS
and CSX must interchange freight with Conrail to reach customers
in the Northeast. A merged Conrail, with either NS or CSX,
affects much more than the Northeast. Absent the kind of
competitive balance Norfolk Southern proposes and which exists in
the West and Southeast today, the merged carrier would not only
dominate the Northeast, it would extend that domination south and
westward.
As a result, the non-merging carrier would be forced to
interchange much of its traffic with its competitor and
eventually would be driven from now competitive markets. This
elimination of competitive service would not be good for freight
shippers any more than it would be good for the losing railroad.
With CSX/CR, 64 cities face a reduction from two competing
railroads to one, compared with only 38 two-to-one points under
CR+NS. CSX/CR results in 7 cities with more than 100,000
population -- Baltimore; Philadelphia; Pittsburgh; Indianapolis;
Dayton, Ohio; Grand Rapids, Mich., and Youngstown, Ohio -- in the
two-to-one category. CR+NS produces only two -- Erie, Pa., and
Fort Wayne, Ind. Similarly, only one short line railroad would
lose competitive connections under CR+NS, while 18 would become
totally tributary to CSX/CR. Norfolk Southern will maintain
competition at all those points.
CREATION OF BALANCED COMPETITION
While a CR+NS combination has much less geographic overlap than
CSX/CR, Norfolk Southern is committed to preserving competition
where the systems overlap. Norfolk Southern will go farther, by
opening the Northeast -- most significantly the New York/New
Jersey metropolitan area and the vital ports in that region -- to
service by two strong competitors for the first time in more than
20 years. This will bring competitive balance between CR+NS and
CSX closer to 55%-45%. It also will assure that freight shippers
will have competitive options throughout the eastern half of the
nation.
Norfolk Southern will further assure that competition is real by
transferring ownership of competing lines. Through ownership,
carriers can differentiate their service and make normal business
decisions about capacity and investment. This is necessary in the
Northeast, where NS and CSX lack market presence and facilities
in numerous major markets. In the West, both large rail systems
already were in most markets and grants of trackage rights could
fine-tune competitive balance.
CR+NS -- BENEFITS FOR ALL CONSTITUENCIES
Norfolk Southern recognizes the public policy benefits of market
share and geographic coverage balance. Basically, CR+NS has fewer
disruptions to communities, workers and short line railroads than
would a CSX/CR combination, as well as far greater service and
efficiency benefits.
For rail service customers, for rail employees, for the
communities we serve, for the deregulated rail industry, and for
the public at large, CR+NS clearly is
THE BETTER CHOICE!
2/28/97
[Exhibit (a)(15)]
FOR IMMEDIATE RELEASE
March 3, 1997
Norfolk Southern Pleased With Developments Over Conrail
Media Contact: Robert Fort
(757) 629-2710
NORFOLK, VA -- The following statement was issued today
by David R. Goode, Chairman, President and Chief
Executive Officer of Norfolk Southern Corporation (NYSE:
NSC):
"We are pleased with today's announcement that CSX
and Conrail are negotiating to resolve the issues facing
the eastern railroads.
"Norfolk Southern is hopeful that CSX and Conrail
will quickly reach a definitive agreement that would
permit CSX and Norfolk Southern to work out a plan to
restructure the rail transportation system in the East
into combined Conrail/Norfolk Southern and Conrail/CSX
systems."
###
World Wide Web Site - http://www.nscorp.com
February 24, 1997
Mr. David M. LeVan Mr. John W. Snow
Chairman, President and Chairman, President and
Chief Executive Officer Chief Executive Officer
Conrail Inc. CSX Corporation
2001 Market Street 901 East Cary Street
Philadelphia, PA 19101 Richmond, VA 23219
Dear David and John:
As you know, we will soon file an Application at the
Surface Transportation Board (STB) for authority to acquire Conrail and,
in order to achieve balanced competition, make available to another Class
I railroad certain lines and rights. Because of Norfolk Southern's
limited presence in the region, the Application represents a solution
which is effective and relatively easy to implement, and which we believe
will be attractive to shippers, public agencies and the STB.
However, in an effort to respond to political and
regulatory calls for settling our differences, we are prepared to offer
an alternative (the Plan) for comprehensive resolution of the issues
confronting the eastern railroads. The Plan offers a different approach
which will require the talents of all three of our organizations to
implement. The enclosed map details the Plan, showing Conrail/CSX and
Conrail/Norfolk Southern operations. Conrail/CSX has a north-south route
and the east-west route over Buffalo (part of old New York Central).
Conrail/Norfolk Southern has a north-south route and the east-west route
over Pittsburgh (part of old Pennsylvania).
If you endorse the Plan, promptly after completion of
definitive documentation for the Plan, Norfolk Southern and CSX will
offer to acquire all the common and ESOP stock of Conrail (other than
shares already in the CSX and Norfolk Southern voting trusts) for $115
cash per share and upon acquisition will deposit such shares in a voting
trust or trusts. Upon completion of the tender offer, the remaining
Conrail shares will be acquired in a merger. To carry out all these
steps, Norfolk Southern and CSX will form a new entity.
As soon as regulatory approval and labor implementing
agreements are effective, Conrail will make available to Norfolk Southern
and to CSX for their respective operation and control the Conrail lines
and rights indicated on the map and all other Conrail operating assets.
Such operation and control will be exclusive except with respect to
trackage rights or joint arrangements or where both CSX and Norfolk
Southern would need joint rights at terminal facilities. At some point in
the future consistent with our respective business objectives, the
necessary steps would be taken to make the new alignments final.
Conrail's corporate headquarters will continue to be
Philadelphia. The assets associated with Norfolk Southern will include
the Pittsburgh service center and the Altoona and Hollidaysburg shop
facilities. The assets associated with CSX will include the Philadelphia
headquarters. Conrail employees in general will remain with the
Conrail/CSX and Conrail/Norfolk Southern operations and assets, as
determined by implementing agreements under the statute. Similarly,
employees affected by coordinations between Conrail and CSX, and Conrail
and Norfolk Southern, will be entitled to protection to the extent
provided by statute. We anticipate that Conrail employee options and
benefits would be handled in a manner analogous to that in the present
Conrail/CSX agreement.
The costs of acquiring all of the Conrail stock will be
divided in proportion to the Conrail gross freight revenues which will
accrue to Conrail/CSX operations and to Conrail/Norfolk Southern
operations under the Plan (the Percentages). The calculation will be
based on a study of Conrail's 1996 gross freight revenues, using standard
traffic study methodology familiar to all the parties. Norfolk Southern's
and CSX's interests in the new entity formed to accomplish the Plan will
be in proportion to their Percentages. Conrail assets and liabilities not
otherwise provided for (and not relating to a Conrail/CSX line or a
Conrail/Norfolk Southern line) will ultimately be discharged or allocated
in accordance with the Percentages. Tax costs, if any, associated with
the Plan will generally be shared in accordance with the Percentages.
Norfolk Southern is ready to begin immediately drafting
documentation and pursuing the corporate actions and regulatory approvals
necessary to implement the Plan. It is suggested that, with respect to
their individual interests, CSX and Norfolk Southern may consider jointly
engaging an independent party to expedite and mediate the process of
documentation, with instructions to strive for fair, realizable and
administratively simple provisions consistent with the outline here
provided.
The Plan is offered without prejudice to our forthcoming
Application to the STB. We believe that the Application and the competi-
tive alternative it proposes will provide an appropriate resolution if we
cannot agree on the Plan. Upon completion of definitive documentation for
the Plan, the Norfolk Southern and CSX applications could be supplement-
ed or converted into a joint application to accomplish the Plan. The
result of either the Application or the Plan could be an eastern railroad
structure in which the Conrail/CSX and Conrail/Norfolk Southern systems
compete at and between most of the major ports and markets east of the
Mississippi. We believe this is a sound basis on which to build an
internationally competitive economy in the region, and that the benefits
of this compromise extend to our companies, employees and customers.
We are willing to consider any alternative suggestions for
accomplishing the same results as the Plan, which in any event is subject
to confirmation of the analysis used to develop it since we do not
possess the information necessary for complete validation of our
estimates. Because this initiative will complicate ongoing negotiations
with other railroads concerning the competitive alternative Norfolk
Southern will offer in its STB Application, we must ask to hear from you
by the close of business Monday, March 3, concerning your interest in
seriously pursuing a solution along these lines.
Sincerely,
[Map of northeastern and midwestern United States illustrating Parent's
proposal.]
