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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
AMENDMENT NO. 2
to
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
Pursuant to Section 14(d)(4)
of the Securities Exchange Act of 1934
------------------------------------
CONRAIL INC.
(Name of Subject Company)
------------------------------------
CONRAIL INC.
(Name of Person(s) Filing Statement)
------------------------------------
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)
N/A
(CUSIP Number of Class of Securities)
------------------------------------
James D. McGeehan
Corporate Secretary
Conrail Inc.
2001 Market Street
Two Commerce Square
Philadelphia, Pennsylvania 19101
(215) 209-4000
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of the Person(s) Filing Statement)
With a copy to:
Robert A. Kindler, Esq.
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
(212) 474-1000
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<PAGE>
INTRODUCTION
Conrail Inc. ("Conrail") hereby amends and supplements its
Solicitation/Recommendation Statement on Schedule 14D-9, originally
filed on December 6, 1996, and amended on December 12, 1996 (as
amended, the "CSX Schedule 14D-9") with respect to an offer by Green
Acquisition Corp., a Pennsylvania corporation ("Purchaser") and a
wholly owned subsidiary of CSX Corporation, a Virginia corporation
("CSX"), to purchase up to an aggregate of 18,344,845 Shares of
Conrail. Capitalized terms not defined herein have the meanings
assigned thereto in the CSX Schedule 14D-9.
Items 4 and 8 of the CSX Schedule 14D-9 are hereby amended and
supplemented by adding the following text at the end thereof:
On December 19, 1996, CSX and Conrail issued a press release,
pursuant to which they announced that they had entered into the Second
Amendment to the Merger Agreement dated as of December 18, 1996 (the
"Second Amendment") to, among other things, (i) increase the
consideration payable pursuant to the Merger, (ii) accelerate the
consummation of the Merger to immediately following the receipt of
applicable shareholder approvals and prior to Surface Transportation
Board approval and (iii) extend the period (the "Exclusivity Period")
during which the Conrail Board has agreed under the Merger Agreement
not to withdraw or modify its recommendations of the CSX Transactions,
approve or recommend any takeover proposal or cause Conrail to enter
into any agreement related to any takeover proposal to December 31,
1998.
On December 18, 1996, the Second Amendment was approved by the
Conrail Board and the disinterested members of the Conrail Board, with
one abstention. Mr. David B. Lewis advised the Conrail Board that
while he continues to fully support the Offer and the Merger, he
wished to abstain from the vote approving the Second Amendment in
light of the provision in the Second Amendment extending the
Exclusivity Period to December 31, 1998.
The Conrail Board continues to believe that a merger of equals
with CSX is in the best interests of Conrail; the Conrail Board
believes that the amended terms of the Merger Agreement represent a
significant improvement over the original terms of the CSX
Transactions.
The Conrail Board, including the disinterested members of the
Conrail Board, also reaffirmed its determination that the transactions
contemplated by the
<PAGE>
Merger Agreement (such as the Offer and the Merger) are in the best
interests of Conrail (taking into account all the Conrail
constituencies affected by such proposed transactions, the short-term
and long-term interests of Conrail, the resources, intent and conduct
(past, stated and potential) of any person seeking to acquire control
of Conrail, and all other pertinent factors). Accordingly, the Conrail
Board recommends that the shareholders of Conrail who desire to
receive cash for a portion of their Shares tender their Shares
pursuant to the Offer.
The Conrail Board, including the disinterested members of
the Conrail Board, also determined that a sale of Conrail to Norfolk
would not be in the best interests of Conrail (taking into account all
the Conrail constituencies affected by such proposed transactions, the
short-term and long-term interests of Conrail, the resources, intent
and conduct (past, stated and potential) of any person seeking to
acquire control of Conrail, and all other pertinent factors).
Accordingly, the Conrail Board recommends that the shareholders of
Conrail not tender their Shares pursuant to the Norfolk Offer.
At the December 18 Conrail Board meeting, the Conrail Board
received fairness opinions from Lazard Freres and Morgan Stanley,
copies of which are attached hereto as Exhibits (a)(9) and (a)(10),
respectively, are incorporated herein by reference and qualify the
foregoing summary in its entirety.
In making the determinations and recommendations set forth
above, the Conrail Board considered the foregoing fairness opinions as
well as the same factors which previously led the Conrail Board to
recommend the Offer and the Merger.
The terms and conditions of the Offer and the Merger
Agreement (as amended) are described in the Offer to Purchase, as
supplemented by the Supplement to the Offer to Purchase dated December
19, 1996 (the "Supplement"), a copy of which is filed as Exhibit
(a)(11) hereto and is incorporated herein by reference. A copy of the
Second Amendment and a copy of the press release are attached hereto
as Exhibits (c)(10) and (a)(12), respectively, are incorporated herein
by reference and qualify the foregoing summary in its entirety.
<PAGE>
On December 19, 1996, Norfolk announced that it had
increased the price offered in the Norfolk Offer to $115 per Share. On
December 20, 1996, Conrail issued a press release, announcing that the
Conrail Board has rejected the revised Norfolk Offer and continues to
recommend that Conrail shareholders not tender their shares pursuant
to the Norfolk Offer.
Norfolk Litigation. On December 13, 1996, Norfolk amended
its complaint to add claims (a) that any postponement by Conrail of
the Pennsylvania Special Meeting scheduled for December 23, 1996
(assuming such postponement was caused by Conrail having failed to
receive the requisite number of votes for approval) would be, and that
granting CSX the right to consent to such postponement was, a breach
of the fiduciary duties of the directors of Conrail, and (b) that CSX
has, in effect, acquired more than 20% of the Shares (within the
meaning of Subchapter 25E) by virtue of the allegation that shares
owned by CSX should be aggregated with Shares that could be voted by
directors of Conrail and, accordingly, that CSX is obligated to pay
"fair value" in cash, to be determined pursuant to Subchapter 25E, to
all shareholders of Conrail other than CSX. Norfolk also added
allegations to its Federal securities law claims that the defendants
had made misleading statements regarding the possibility that the
consideration being offered by CSX might be improved.
At a hearing on December 17, 1996, the Court granted a
limited injunction enjoining the defendants from postponing,
adjourning or not convening the Pennsylvania Special Meeting scheduled
for December 23, 1996, by reason of Conrail or its nominees not having
received sufficient proxies to assure approval of the Articles
Amendment. The Court specified that adjournment or postponement for
other reasons would be permissible under the injunction.
<PAGE>
Item 9. Materials to be filed as Exhibits.
Item 9 of the CSX Schedule 14D-9 is hereby amended and
supplemented by adding the following text thereto:
(a)(9) Opinion of Lazard Freres & Co. LLC dated December 18,
1996.
(a)(10) Opinion of Morgan Stanley & Co. Incorporated dated
December 18, 1996.
(a)(11) Supplement to the Offer to Purchase dated December 19,
1996 (incorporated by reference to Exhibit (a)(15) to
the 14D-1).
(a)(12) Text of press release issued by CSX and Conrail dated
December 19, 1996.
(a)(13) Text of press release issued by Conrail dated December
20, 1996.
(c)(10) Second Amendment to Agreement and Plan of Merger dated
as of December 18, 1996 (incorporated by reference to
Exhibit (c)(6) to the 14D-1).
(c)(11) Form of Amended and Restated Voting Trust Agreement
(incorporated by reference to Exhibit (c)(7) to the
14D-1).
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true,
complete and correct.
CONRAIL INC.
By /s/ Timothy T. O'Toole
-------------------------------------
Name: Timothy T. O'Toole
Title: Senior Vice President--Finance
Dated as of December 20, 1996
<PAGE>
EXHIBIT INDEX
Exhibit Description Page No.
- ------- ----------- --------
*(a)(1) Offer to Purchase dated December 6, 1996
(incorporated by reference to Exhibit (a)(1) to
CSX's and Purchaser's Tender Offer Statement on
Schedule 14D-1 dated December 6, 1996, as
amended (the "CSX
14D-1"))........................................
*(a)(2) Letter of Transmittal (incorporated by
reference to Exhibit (a)(2) to the CSX
14D-1)..........................................
*(a)(3) Text of press release issued by CSX dated
December 6, 1996 (incorporated by reference to
Exhibit (a)(7) to the CSX
14D-1)..........................................
*(a)(4) Letter to shareholders of Conrail dated
December 6,
1996............................................
*(a)(5) Form of Summary Advertisement dated December 6,
1996 (incorporated by reference to Exhibit
(a)(5) to the CSX
14D-1)..........................................
*(a)(6) Opinion of Lazard Freres & Co. LLC
(incorporated by reference to Exhibit (a)(14)
to the Solicitation/ Recommendation Statement
on Schedule 14D-9 of Conrail dated October 16,
1996, as amended, relating to the First Offer
(the "First
14D-9"))........................................
*(a)(7) Opinion of Morgan Stanley & Co. Incorporated
(incorporated by reference to Exhibit (a)(15)
to the First
14D-9)..........................................
*(a)(8) Text of press release issued by Conrail and CSX
dated December 10,
1996............................................
(a)(9) Opinion of Lazard Freres & Co. LLC dated
December 18,
1996............................................
(a)(10) Opinion of Morgan Stanley & Co. Incorporated
dated December 18,
1996............................................
(a)(11) Supplement to the Offer to Purchase dated
December 19, 1996 (incorporated by reference to
Exhibit (a)(15) to the
14D-1)..........................................
(a)(12) Text of press release issued by CSX and Conrail
dated December 19, 1996.........................
(a)(13) Test of press release issued by Conrail dated
December 20,
1996............................................
<PAGE>
Exhibit Description Page No.
- ------- ----------- --------
(b) Not applicable.................................
*(c)(1) Agreement and Plan of Merger dated as
of October 14, 1996 (incorporated by reference
to Exhibit (c)(1) to CSX's and Purchaser's
Tender Offer Statement on Schedule 14D-1 dated
October 16, 1996, as amended, relating to the
First Offer (the "First CSX
14D-1")).......................................
*(c)(2) First Amendment to Agreement and Plan
of Merger dated as of November 5, 1996
(incorporated by reference to Exhibit (c)(7) to
the First CSX
14D-1).........................................
*(c)(3) Conrail Stock Option Agreement dated as
of October 14, 1996 (incorporated by reference
to Exhibit (c)(2) to the First CSX
14D-1).....................................
*(c)(4) CSX Stock Option Agreement dated as of
October 14, 1996 (incorporated by reference to
Exhibit (c)(3) to the First CSX
14D-1).....................................
*(c)(5) Voting Trust Agreement dated as of
October 15, 1996 (incorporated by reference to
Exhibit (c)(4) to the First CSX
14D-1).....................................
*(c)(6) Employment Agreement of Mr. LeVan dated
as of October 14, 1996 (incorporated by
reference to Exhibit (c)(5) to the First
14D-9).....................................
*(c)(7) Change of Control Agreement of Mr.
LeVan dated as of October 14, 1996
(incorporated by reference to Exhibit (c)(6) to
the First
14D-9).....................................
*(c)(8) Answer and Defenses of Conrail, CSX and
the individual defendants to Second Amended
Complaint, and Counterclaim of Conrail and CSX
in Norfolk Southern et al. v. Conrail Inc. et
al., filed on December 5, 1996, in the United
States District Court for the Eastern District
of Pennsylvania (incorporated by reference to
Exhibit (c)(8) to the Solicitatio
Recommendation Statement on Schedule 14D-9 of
Conrail dated November 6, 1996, as amended,
relating to the Norfolk
Offer).......................................
<PAGE>
Exhibit Description Page No.
- ------- ----------- --------
*(c)(9) Pages 4-5 and 9-14 of Conrail's Proxy Statement
dated April 3, 1996 (incorporated by reference
to Exhibit (c)(7) to the First
14D-9)..........................................
(c)(10) Second Amendment to Agreement and Plan of
Merger dated as of December 18, 1996
(incorporated by reference to Exhibit (c)(6) to
the
14D-1)..........................................
(c)(11) Form of Amended and Restated Voting Trust
Agreement (incorporated by reference to Exhibit
(c)(7) to the
14D-1)..........................................
- ---------------------
* Previously filed
EXHIBIT (a)(9)
December 18, 1996
The Board of Directors
Conrail Inc.
2001 Market Street
Philadelphia, PA 19103
Dear Members of the Board:
You have requested our opinion as to the fairness, from a
financial point of view, to the holders of shares of Common Stock, par
value $1 per share ("Common Stock"), and of Series A ESOP Convertible
Preferred Stock (such Preferred Stock together with the Common Stock
is referred to as the "Shares") of Conrail Inc. (the "Company") of the
consideration to be received in a series of transactions
(collectively, the "Transactions") pursuant to the Agreement and Plan
of Merger among the Company, CSX Corporation ("CSX") and Green
Acquisition Corp. ("Tender Sub"), dated as of October 14, 1996, as
amended as of November 5, 1996 and as further amended as of December
18, 1996 (collectively the "Merger Agreement"). Pursuant to the Merger
Agreement, on November 21, 1996, Tender Sub accepted for payment
pursuant to an offer to purchase (the "First Offer") 19.9% of the
outstanding Shares at a price of $110.00 per share net in cash (the
"Offer Consideration"). The terms of the Merger Agreement provide,
among other things, that (i) if certain conditions are satisfied,
Tender Sub will accept for payment pursuant to an offer to purchase
(the "Second Offer" and together with the First Offer, the "Offer")
additional Shares such that the Shares purchased in the First Offer
and the Second Offer will total a number of Shares (the "Designated
Number") equal to 40% of the fully diluted Shares excluding the Option
Shares referred to below (the "Fully Diluted Shares") and (ii) subject
to, among other things, the favorable required vote of holders of
Shares, pursuant to the First Merger and the Second Merger (each as
defined in the Merger Agreement and collectively referred to herein as
the "Merger"), each remaining outstanding Share (other than Shares
owned by the Company as treasury stock or owned by CSX, Tender Sub or
any other subsidiary of CSX and other than Shares held by holders who
properly exercise and perfect dissenter's rights, if any) will be
converted into the right to receive (the "Merger Consideration") (x)
1.85619 shares of Common Stock of CSX, par value $1.00 per share ("CSX
Common Stock"), and (y) convertible
<PAGE>
preferred stock of CSX (the "Additional Securities") having a value to
be determined in accordance with the terms of the Merger Agreement on
a fully distributed basis equal to $16 per Share; provided that if
less than the Designated Number of Shares is purchased pursuant to the
Offer, the Merger Consideration will be adjusted so that when taken
together with the Offer, 60 percent of the Fully Diluted Shares will
each have been converted into the right to receive the Merger
Consideration and 40 percent of the Fully Diluted Shares will have
received or been converted into the right to receive an amount of cash
equal to the Offer Consideration. The Offer Consideration and the
Merger Consideration are collectively referred to herein as the
"Consideration."
In connection with the rendering of this opinion, we have:
(i) Reviewed the terms and conditions of the Merger
Agreement and the financial terms of the Transactions, all as set
forth in the Merger Agreement, and the option agreement between
Company and CSX pursuant to which CSX was granted the right to
purchase shares of Common Stock (the "Option Shares") and the
option agreement between CSX and the Company pursuant to which
the Company was granted the right to purchase shares of CSX
Common Stock, each dated October 14, 1996 (collectively, the
"Option Agreements");
(ii) Analyzed certain historical business and financial
information relating to the Company and CSX;
(iii) Reviewed certain financial forecasts and other data
provided to us by the Company and CSX relating to the businesses
of the Company and CSX, respectively, including the most recent
business plan for the Company prepared by the Company's senior
management, in the form furnished to us;
(iv) Conducted discussions with members of the senior
managements of the Company and CSX with respect to the businesses
and prospects of the Company and CSX, respectively, the strategic
objectives of each and possible benefits which might be realized
following the Merger;
(v) Reviewed public information with respect to certain
other companies in the lines of businesses we
<PAGE>
believe to be generally comparable in whole or in part to the
businesses of the Company and CSX and reviewed the financial
terms of certain other business combinations involving companies
in lines of businesses we believe to be generally comparable in
whole or in part to the businesses of the Company and CSX that
have recently been effected;
(vi) Reviewed the historical stock prices and trading
volumes of Common Stock and CSX Common Stock; and
(vii) Conducted such other financial studies, analyses and
investigations as we deemed appropriate.
We have relied upon the accuracy and completeness of the
foregoing financial and other information and have not assumed any
responsibility for independent verification of such information or any
independent valuation or appraisal of any of the assets of the Company
or CSX nor have we been furnished with any such appraisals. With
respect to financial forecasts, we have assumed that they have been
reasonably prepared on bases reflecting the best currently available
estimates and judgments of managements of the Company and CSX as to
the future financial performance of the Company and CSX, respectively.
We assume no responsibility for and express no view as to such
forecasts or the assumptions on which they are based.
Our opinion is necessarily based on economic, monetary,
market and other conditions as in effect on, and the information made
available to us as of, the date hereof.
In rendering our opinion, we have assumed that (i) the
Transactions will be consummated substantially on the terms described
in the Merger Agreement, without any waiver of any material terms or
conditions by any party thereto, and that obtaining the necessary
regulatory approvals for the Transactions will not have an adverse
effect on CSX or the Company or on the trading value of CSX Common
Stock or the Additional Securities and (ii) the Merger will qualify as
a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended. We were not requested to, and did
not, solicit third party offers to acquire all or any part of the
Company.
<PAGE>
We are acting as financial advisor to the Company's Board of
Directors in connection with the Transactions and will receive fees
for such services, a substantial portion of which fees are contingent
upon the consummation of the Transactions. Our Firm has in the past
provided and is currently providing investment banking and financial
advisory services to the Company and has received customary fees for
rendering such services. Our Firm has in the past also provided
investment banking and financial advisory services to CSX and has
received customary fees for rendering such services.
Our engagement and the opinion expressed herein are for the
benefit of the Company's Board of Directors and our opinion is
rendered in connection with its consideration of the Transactions.
This opinion is not intended to and does not constitute a
recommendation to any holder of Shares as to whether such holder
should tender Shares pursuant to the Offer or vote to approve the
Merger Agreement and the transactions contemplated thereby. It is
understood that, except for inclusion of this letter in its entirety
in a proxy statement or tender offer recommendation statement on
Schedule 14D-9 from the Company to holders of Shares relating to the
Transactions, this letter may not be disclosed or otherwise referred
to without our prior written consent, except as may otherwise be
required by law or by a court of competent jurisdiction.
As you know, on October 24, 1996, Norfolk Southern
Corporation commenced a tender offer (the "NSC Offer") for all of the
outstanding Shares at a price per Share of $100 net in cash, which per
Share price was increased to $110 on November 8, 1996. Counsel to the
Company has advised the Company's Board of Directors that the fact
that the NSC Offer is subject to, among other conditions, the
termination of the Merger Agreement and that the Company is currently
contractually prohibited from terminating the Merger Agreement
pursuant to Section 4.2(b) thereof creates significant legal
uncertainty relating to the consummation of the NSC Offer. Counsel to
the Company has advised the Company's Board of Directors that, under
Pennsylvania law, in considering a proposed business combination, the
Company's Board of Directors is empowered to take into account the
long-term interests of the Company and all of its constituencies, not
solely the highest price for the Company's Shares. Accordingly, at
your request, in rendering our opinion, we did not address the
relative
<PAGE>
merits of the Transactions, including said Section 4.2(b), the NSC
Offer and any alternative potential transactions.
Based on and subject to the foregoing, we are of the opinion
that, as of the date hereof, the Consideration to be received by the
holders of Shares pursuant to the Offer and the Merger, when taken
together, is fair to such holders (other than CSX, Tender Sub or any
other subsidiary of CSX), from a financial point of view.
Very truly yours,
LAZARD FRERES & CO. LLC
By /s/ J. ROBERT LOVEJOY
-----------------------
J. Robert Lovejoy
Managing Director
EXHIBIT (a)(10)
December 18, 1996
Board of Directors
Conrail Inc.
2000 Market Street
Philadelphia, PA 19101-1422
Gentlemen and Mesdames:
We understand that Conrail Inc. (the "Company"), CSX Corporation
("CSX") and Green Acquisition Corp., a wholly- owned subsidiary of CSX
("Acquisition Sub"), have entered into an Agreement and Plan of
Merger, dated as of October 14, 1996 as amended as of November 5,
1996, and as further amended as of December 18, 1996 (collectively,
the "Merger Agreement"). Pursuant to the Merger Agreement, on November
21, 1996, Acquisition Sub accepted for payment pursuant to an offer to
purchase (the "First Offer") 19.9% of the issued and outstanding
shares of common stock, par value $1 per share (the "Company Common
Stock"), and Series A ESOP Convertible Junior Preferred Stock
(together with the Company Common Stock, the "Shares") of the Company,
for $110.00 per share net to the seller in cash (the "Offer
Consideration"). The terms of the Merger Agreement provided, among
other things, that: (i) if certain conditions are satisfied,
Acquisition Sub will accept for payment pursuant to an offer to
purchase (the "Second Offer" and, together with the First Offer, the
"Offer") additional Shares such that the Shares purchased in the First
Offer and the Second Offer will total a number of Shares (the
"Designated Number") equal to 40% of the fully-diluted Shares,
excluding the Option Shares referred to below (the "Diluted Shares");
and (ii) upon the receipt of certain shareholder approvals and
satisfaction of other conditions thereto, pursuant to the First Merger
and the Second Merger (each as defined in the Merger Agreement and
collectively referred to herein as the "Merger," and the "Merger"
together with the Offer, the "Transaction"), the surviving corporation
will become a wholly-owned subsidiary of CSX and each outstanding
share of the Company Common Stock, other than shares held in treasury
or held by CSX or its subsidiaries, will be converted into the right
to receive (x) 1.85619 shares of common stock, par value $1.00 per
share (the "CSX Common Stock"), of CSX (the "Stock Consideration" and,
together with the Offer Consideration,
<PAGE>
the "Merger Consideration," and the Merger Consideration, together
with the Offer Consideration, the "Consideration"); and (y)
convertible preferred stock of CSX ("Additional Securities") having a
fully-distributed trading value equal to $16 per Share to be
determined in acordance with the terms of the Merger Agreement;
provided that if less than the Designated Number of Shares are
purchased pursuant to the Offer, the Consideration will be adjusted so
that when taken together with the Offer, 60% of the Fully Diluted
Shares will each have been converted into the right to receive the
Merger Consideration, and 40% of the Fully Diluted Shares will have
received or been converted into the right to receive an amount of cash
equal to the Offer Consideration. The terms and conditions of the
Offer and the Merger are more fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the Consideration to be
received by the holders of Shares pursuant to the Offer and the
Merger, taken together, is fair from a financial point of view to such
holders.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly-available financial
statements and other information of the Company
and CSX, respectively;
(ii) reviewed certain internal financial statements and
other financial and operating data concerning the
Company and CSX prepared by the managements of the
Company and CSX, respectively;
(iii) reviewed certain financial projections for CSX
prepared by the management of CSX;
(iv) reviewed certain financial projections, including
estimates of certain potential benefits of the
proposed business combination, prepared by the
management of the Company;
(v) discussed, on a limited basis, the past and
current operations and financial condition and the
prospects of the Company and CSX with senior
executives of the Company and CSX, respectively;
(vi) reviewed the reported prices and trading activity
for the Company Common Stock and the CSX Common
Stock;
<PAGE>
(vii) compared the financial performance of the Company
and CSX and the prices and trading activity of the
Company Common Stock and the CSX Common Stock with
that of certain other comparable, publicly-traded
companies and their securities;
(viii) reviewed the financial terms, to the extent
publicly available, of certain comparable
acquisition transactions;
(ix) participated in discussions among representatives
of the Company, CSX and their financial and legal
advisors;
(x) reviewed the Merger Agreement and certain related
documents; and
(xi) performed such other analyses and considered such
other factors as we have deemed appropriate.
We have assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by us for the
purposes of this opinion. With respect to the financial projections,
including estimates of certain potential benefits of the proposed
business combination, we have assumed that they have been reasonably
prepared on bases reflecting the best currently- available estimates
and judgment of the future financial performance of the Company and
CSX, respectively. We have not made any independent valuation or
appraisal of the assets or liabilities of the Company or CSX, nor have
we been furnished with any such appraisals. In arriving at our
opinion, we have assumed (i) that the Merger will qualify as a
reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended, and (ii) that obtaining all the
necessary regulatory and governmental approvals for the Merger will
not have an adverse effect on the Company, CSX or on the trading value
of the CSX Common Stock or the Additional Securities. We have assumed
that the Offer and the Merger will be consummated substantially in
accordance with the terms set forth in the Merger Agreement, without
any waiver of any material terms or conditions by any party thereto.
Our opinion is necessarily based on economic, market and other
conditions in effect on, and the information made available to us as
of, the date thereof. In arriving at our opinion, we were not
authorized to solicit, and did not solicit, interest from any party
<PAGE>
with respect to the acquisition of the Company or any of its assets.
We have been engaged to provide this opinion to the Board of Directors
of the Company in connection with this transaction and will receive a
fee for our services. In the past, Morgan Stanley & Co. Incorporated
and its affiliates have provided financial advisory and financing
services for the Company and CSX and have received fees for the
rendering of these services.
It is understood that this letter is for the information of the Board
of Directors of the Company and may not be used for any other purpose
without our prior written consent, except that this opinion may be
included in its entirety in any filing made by the Company with the
Securities and Exchange Commission with respect to the Offer and the
Merger. In addition, we express no opinion and make no recommendation
as to whether the holders of the Company Common Stock should tender
such shares pursuant to the Offer or vote at the stockholders' meeting
held in connection with the Merger. As you know, on October 24, 1996,
Norfolk Southern Corporation commenced a tender offer (the "NSC
Offer") for all of the outstanding Shares at a price per Share of $100
net in cash, which per Share price was increased to $110 on November
8, 1996. Counsel to the Company has advised the Company's Board of
Directors that the fact that the NSC Offer is subject to, among other
conditions, the termination of the Merger Agreement, and that the
Company is currently contractually prohibited from terminating the
Merger Agreement pursuant to Section 4.2(b) thereof creates
significant legal uncertainty relating to the consummation of the NSC
Offer, Counsel to the Company has advised the Company's Board of
Directors that, under Pennsylvania law, in considering a proposed
business combination, the Company's Board of Directors is empowered to
take into account the long-term interests of the Company and all of
its constituencies, not solely the highest price for the Company's
Shares. Accordingly, at your request, in rendering our opinion, we did
not address the relative merits of the Transaction, including said
Section 4.2(b), the NSC Offer and any alternative potential
transaction.
Based on the foregoing, we are of the opinion on the date thereof that
the Consideration to be received by the holders of Shares pursuant to
the Offer and the Merger, taken together, is fair from a financial
point of view to such
<PAGE>
holders (other than CSX, Acquisition Sub or any other subsidiary of
CSX).
Very truly yours,
MORGAN STANLEY & CO.,
INCORPORATED,
By:
/s/ MAHMOUD A. MAMDANI
---------------------------
Mahmoud A. Mamdani
Managing Director
EXHIBIT (a)(12)
FOR IMMEDIATE RELEASE
CONTACTS:
CSX Corporation Conrail Inc.
Thomas E. Hoppin Craig R. MacQueen
(804) 782-1450 (215) 209-4594
Kekst and Company Abernathy MacGregor Group
Richard Wolff Joele Frank/Dan Katcher
(212) 593-2655 (212) 371-5999
CSX AND CONRAIL INCREASE MERGER CONSIDERATION
BY $16 PER SHARE
VOTING TRUST TO PERMIT EARLY 1997 PAYMENT
OF MERGER CONSIDERATION TO CONRAIL SHAREHOLDERS
CASH PORTION TO REMAIN AT $110 PER CONRAIL SHARE
TENDER OFFER EXTENDED UNTIL JANUARY 22, 1997
SPECIAL CONRAIL SHAREHOLDER MEETING NOW SCHEDULED
FOR JANUARY 17, 1997
Philadelphia, PA and Richmond, VA (December 19, 1996) -- Conrail
Inc. [NYSE:CRR] and CSX Corporation [NYSE:CSX] announced today that
they have amended their merger agreement to increase the merger
consideration by $16 per Conrail share, or approximately $870 million
in the aggregate. Conrail shareholders will also benefit from the
significant value of receiving the merger consideration earlier than
previously contemplated. Conrail shareholders will now receive in the
merger, for 60% of their shares, an additional $16 per share in CSX
convertible preferred stock, the terms of which will be set prior to
the merger so that such securities would trade at par on a fully
distributed basis. This is in addition to the tax-free 1.85619 shares
of CSX common stock to be received in the merger.
The amended agreement also provides that the merger will occur at
the time of the CSX and Conrail shareholders meetings for approval of
matters related to the merger. These meetings are expected to be held
in the first quarter of 1997. Upon shareholder approval and
consummation of the merger, the Conrail shareholders would receive the
merger consideration of CSX common stock and CSX convertible preferred
stock. All the Conrail stock acquired by CSX, both in the tender and
in the merger, would be placed in a voting trust pending the outcome
of the Surface Transportation Board's (STB) proceeding.
<PAGE>
CSX has already purchased 19.9% of Conrail's common and ESOP
preferred stock, through a tender offer for $110 in cash per Conrail
share. CSX is currently offering to purchase up to an additional
18,344,845 shares of Conrail through a second cash tender offer at
$110 per share.
David M. LeVan, chairman, president and chief executive officer
of Conrail, said "Because of the actions taken by the Conrail board,
our shareholders are receiving extraordinary value in our strategic
merger-of-equals with CSX. The original terms of the merger provided
our shareholders with a price at the high end of what has been paid in
railroad mergers. That price has since been increased by more than
$1.5 billion before taking into account the significant value
associated with receiving the merger consideration in early 1997. In
every respect, this merger holds great potential and clearly offers
the best possible result for Conrail. This amendment to the merger
agreement reaffirms the decision of the Conrail board that it is not
willing to agree to the sale of Conrail to Norfolk Southern."
John W. Snow, chairman, president and chief executive officer of
CSX said "The actions taken by the CSX and Conrail boards allow us to
move on to the next stage of the process, the filing of our merger
application with the STB. We are confident that we will present a
strong case and look forward to building the world's leading
transportation and logistics company."
The amended merger agreement provides that the period of time
during which each of Conrail and CSX has agreed that it will not
discuss or agree to any takeover proposal with a third party has been
extended to the termination date under the merger agreement, December
31, 1998. CSX and Conrail also announced that the CSX tender offer has
been extended to 5:00 p.m., Eastern Standard Time, on January 22, 1997
and the special shareholders meeting seeking approval of the opt-out
of the Pennsylvania statute has been postponed to 2:00 p.m., Eastern
Standard Time, on January 17, 1997. CSX has been advised by the
depositary, on a preliminary basis, that fewer than 100,000 shares
have been tendered into the CSX offer as of the close of business on
December 18, 1996.
Conrail, with corporate headquarters in Philadelphia, PA,
operates an 11,000-mile rail freight network in 12 northeastern and
midwestern states, the District of Columbia, and the Province of
Quebec. Conrail's home page on the Internet can be reached at
http://www.CONRAIL.com.
CSX, headquartered in Richmond, VA, is an international company
offering a variety of rail, container-shipping, intermodal, trucking,
barge and contract logistics management services. CSX's home page on
the Internet can be reached at http://www.CSX.com.
EXHIBIT (a)(13)
FOR IMMEDIATE RELEASE
CONTACTS:
Conrail Inc. Abernathy MacGregor Group
Craig MacQueen Joele Frank/Dan Katcher
(215) 209-4594 (212) 371-5999
CONRAIL REJECTS NORFOLK SOUTHERN'S REVISED HOSTILE OFFER
------------------------------------------------------------
Philadelphia, PA, (December 20, 1996)--Conrail Inc.
[NYSE:CRR] announced today that its board of directors has
rejected Norfolk Southern's revised $115 per share
unsolicited tender offer.
David M. LeVan, chairman, president, and chief
executive officer of Conrail said, "The Conrail board has
again confirmed that a merger of equals with CSX, and not a
sale to Norfolk Southern, is in the best interests of
Conrail and its constituencies, including its shareholders,
employees, suppliers, customers and communities served. The
CSX transaction provides extraordinary value to our
shareholders which would not have been available without the
actions taken by the Conrail board.
Conrail, with corporate headquarters in Philadelphia,
PA, operates an 11,000-mile rail freight network in 12
northeastern and midwestern states, the District of
Columbia, and the Province of Quebec. Conrail's home page
can be reached at http://www.CONRAIL.com.
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