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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 12
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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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, December 20, 1996, January 3,
1997, January 10, 1997, January 14, 1997, January 16, 1997, January 21, 1997,
January 28, 1997, February 3, 1997 and February 12, 1997 (as amended, the
"Schedule 14D-9"), with respect to an offer by Green Acquisition Corp., a wholly
owned subsidiary of CSX Corporation ("CSX") to purchase all the outstanding
Shares. Capitalized terms not defined herein have the meanings assigned thereto
in the Schedule 14D-9.
ITEM 2. TENDER OFFER OF THE BIDDER.
Item 2 of the Schedule 14D-9 is hereby amended and supplemented as follows:
On March 7, 1997, Conrail, CSX and Purchaser entered into a Third Amendment
(the "Third Amendment") to the Merger Agreement. Pursuant to the Merger
Agreement (as so amended), (i) the price per Share offered in the Offer has been
increased from $110 to $115, net to the seller in cash, without interest, and
the number of Shares sought pursuant to the Offer has been increased to all
outstanding Shares and the expiration date of the Offer has been extended to
5:00 p.m., New York City time, on Friday April 18, 1997 (subject to further
extension to June 2, 1997 without the consent of Conrail and whether or not all
the conditions have then been satisfied), (ii) the consideration paid per Share
in the Merger for all remaining outstanding Shares following consummation of the
Offer has been increased to $115 in cash and (iii) the conditions to the Offer
relating to Subchapter E becoming inapplicable to Conrail and relating pending
governmental actions or proceedings have been deleted, and a condition has been
added that a minimum number of Shares are tendered to the Offer which, together
with the Shares already owned by CSX and Purchaser, represents more than a
majority of the outstanding Shares on a fully diluted basis (the "Minimum
Condition"). In addition, neither the Offer nor the Merger is subject to CSX's
having obtained financing.
The Third Amendment also provides that CSX will have sole control over the
STB approval process and will be free to conduct by itself discussions with
other railroads, including Norfolk, relating to competitive issues raised by the
CSX Transactions, and to enter into any resulting agreement. It is anticipated
that CSX and Norfolk will negotiate an appropriate division of Conrail's assets;
however, neither the Offer nor the Merger is conditioned on CSX's reaching an
agreement with Norfolk. The Third Amendment states that Conrail will cooperate
with CSX in pursuing the foregoing, including by amending the Merger Agreement
to facilitate an arrangement or agreement with Norfolk, such as an agreement
pursuant to which Norfolk would join the Offer and buy a portion of the Shares;
provided that any such amendment will not change the form or amount of the
consideration to be paid in the Offer or the Merger or otherwise adversely
affect the benefits to be received by Conrail shareholders or employees under
the Merger Agreement or delay or adversely affect the CSX Transactions.
Pursuant to the Third Amendment, three members of Conrail's board of
directors approved by CSX shall be invited to join the CSX Board of Directors
and a transition team will be established, the leadership of which will include
senior executive officers of CSX and Conrail to ensure the orderly operation of
Conrail during the STB approval process and an orderly transition thereafter.
Although the headquarters of the combined company will no longer be located in
Philadelphia, CSX has stated that it intends, following STB approval, to
maintain Conrail's Juniata locomotive shops at Altoona, Pennsylvania, Conrail's
Sam Ray car shops at Hollidaysburg, Pennsylvania, Conrail's Pittsburgh service
center and a major operating presence in Philadelphia (including the
headquarters of the surviving corporation).
Pursuant to the Third Amendment, Conrail's option to purchase 43,090,773
shares of CSX Stock has been cancelled, and Conrail's right to receive a
termination fee in the event of the termination of the Merger Agreement in
connection with certain takeover proposals for CSX has been eliminated. The
Conrail Stock Option Agreement and the right of CSX to receive a termination fee
remain intact.
Under the Third Amendment, Conrail and CSX agreed to reduce from December
31, 1998 to December 31, 1997 the period of time during which the Conrail Board
is prohibited from (i) withdrawing or
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modifying, or publicly proposing to withdraw or modify, its approval or
recommendation of the CSX Transactions, in a manner adverse to CSX, (ii)
approving or recommending, or publicly proposing to approve or recommend, any
competing proposal or (iii) causing Conrail to enter into any agreement related
to any such competing proposal.
Under the Merger Agreement as amended, Conrail may terminate the Merger
Agreement in the event that after June 2, 1997, CSX and Purchaser fail to
consummate the Offer for any reason other than the non-occurrence of any
condition to the Offer. In the event that CSX and Purchaser fail to consummate
the Offer under such circumstances, Conrail will be entitled to exercise any
additional remedies it may have.
Under the Merger Agreement as amended, CSX has the right to unilaterally
increase the price offered in the Offer (without making any change in the
consideration per Share payable in the Merger), subject to the obligation to
cause the Offer to remain open for 10 business days following the date any such
change is publicly announced. Pursuant to the Merger Agreement, however, CSX
cannot change the consideration payable in the Merger without the consent of
Conrail.
The terms and conditions of the Offer and the Merger Agreement are
described under the captions "TERMS OF THE OFFER; PRORATION; EXPIRATION DATE"
and "MERGER AGREEMENT; OTHER AGREEMENTS" in the Offer to Purchase, as
supplemented by the Supplement to the Offer to Purchase dated March 7, 1997 (the
"Supplement"), a copy which is filed as Exhibit (a)(30) hereto and is
incorporated herein by reference. The foregoing summary description is qualified
in its entirety by reference to the Offer to Purchase and its supplements filed
as Exhibits (a)(1), (a)(11) and (a)(30) hereto.
ITEM 3. IDENTITY AND BACKGROUND.
Item 3 is hereby amended and supplemented as follows:
(b)(2) Certain Executive Compensation and Other Employee-Related Matters in
Connection with the Merger.
Effects of Merger on Employee Benefit and Stock Plans. CSX shall cause the
Surviving Corporation to honor all obligations under employment agreements and
employee benefit plans, programs and policies and arrangements of Conrail in
accordance with the terms of the Merger Agreement and, after the date of STB
approval, to provide benefits to those Conrail employees transferred to Parent
or another entity on a basis no less favorable in the aggregate than those
provided to similarly situated employees of such entity. The Surviving
Corporation will provide severance or supplemental retirement benefits to
non-union employees (other than executive level employees) who are terminated
within three years of STB approval equal to between 6 months and 24 months of
salary (depending upon an employee's service). Medical coverage will also be
continued for these employees for specified periods. The Surviving Corporation
will also establish a stay bonus program that provides a lump sum cash payment
to non-union employees who remain employed until the date of STB approval with
additional payments made to those employees who remain employed for up to six
months thereafter.
In accordance with the Merger Agreement, all holders of outstanding stock
options will receive a payment equal to the spread between the option price and
the Amended Second Offer Price multiplied by the number of shares of Conrail
Common Stock subject to the option. In addition, the Merger Agreement permits
Conrail to accelerate the vesting of any non-vested grants of performance
shares.
Executive Agreements. Following the date of STB approval, Mr. LeVan will
no longer be employed by the Surviving Corporation. Conrail and CSX have agreed
that CSX shall pay Mr. LeVan on the date of STB approval, in lieu of any stay
bonus and severance or termination benefits, a lump sum equal to the economic
value of the LeVan Agreement (as reasonably determined by the parties in good
faith). Conrail executives (other than Mr. LeVan) will be paid the value of
their "change of control" contracts in accordance with the terms thereof if
their employment with the Surviving Corporation terminates under certain
circumstances after the close of the Amended Second Offer or if they remained
employed by the Surviving Corporation until May 31, 1998.
2
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ITEM 4. THE SOLICITATION OR RECOMMENDATION.
Item 4 is hereby amended and supplemented as follows:
(a) Recommendation of the Board of Directors.
At meetings held on March 3, 1997 and March 7, 1997, the Conrail Board,
including the disinterested members of the Conrail Board, determined that the
terms of the Merger Agreement (as amended) are in the best interests of Conrail
and its constituencies. ACCORDINGLY, THE CONRAIL BOARD UNANIMOUSLY RECOMMENDS
THAT THE SHAREHOLDERS OF CONRAIL TENDER THEIR SHARES PURSUANT TO THE OFFER.
The Conrail Board recommends that shareholders tender their Shares pursuant
to the Offer because it has determined that the CSX Transactions are in the best
interests of Conrail and its constituencies. Although the Conrail Board would
have preferred for Conrail's system to remain intact, the CSX Transactions
represent the best possible transactions under the circumstances as they
developed. Not only is the value to be received by Conrail's shareholders
pursuant to the terms of the CSX Transactions unprecedented as compared to other
comparable railroad business combinations, but the CSX Transactions provide the
opportunity for shareholders to receive such consideration within 90 days with
no regulatory risk. The Merger Agreement also provides protection in the form of
stay bonuses and enhanced severance arrangements for Conrail employees not
protected by collective bargaining agreements, and states that CSX intends to
make a substantial commitment to preserving operations in Pennsylvania.
Copies of two press releases announcing the Conrail Board's actions over
the last week, and a letter to the shareholders of Conrail communicating the
Conrail Board's recommendations are filed as Exhibits (a)(29), (a)(31) and
(a)(32) hereto, respectively, and are incorporated herein by reference.
(b)(1) Background.
The information contained under the caption "BACKGROUND OF THE OFFER SINCE
DECEMBER 19, 1996; CONTACTS WITH THE COMPANY" in the Supplement is incorporated
herein by reference.
(2) Reasons for Recommendation.
In making the determinations and recommendations set forth above in Section
(a) of this Item 4, the Conrail Board considered a number of factors, including,
without limitation, the following:
(i) The historical and recent market prices of the Shares and the fact
that the Offer and the Merger will enable shareholders to realize an
extraordinary premium over the prices at which the Shares traded prior to
execution of the Merger Agreement.
(ii) The receipt by the Conrail Board of fairness opinions of Lazard
Freres & Co. LLC ("Lazard Freres") and Morgan Stanley & Co. Incorporated
("Morgan Stanley"), dated March 7, 1997, to the effect that the
consideration to be received by Conrail's shareholders in the Offer and the
Merger, taken together, is fair to such shareholders from a financial point
of view. In rendering their respective fairness opinions, based on the
factors described therein and at the request of counsel for the Conrail
Board, neither Lazard Freres nor Morgan Stanley addressed the relative
merits of the CSX Transactions, including Section 4.2(b) of the Merger
Agreement, the Proposed Norfolk Transactions or any alternative potential
transactions (copies of such opinions setting forth assumptions made and
matters considered by Lazard Freres and Morgan Stanley are filed as
Exhibits (a)(33) and (a)(34), respectively, and should be read in their
entirety).
3
<PAGE> 5
(iii) The view of the Conrail Board that the CSX Transactions provide
extraordinary value to Conrail shareholders within 90 days with no
regulatory risk, and that the Offer is not conditioned on CSX's obtaining
financing or reaching an agreement with Norfolk.
(iv) The view of the Conrail Board that the Merger Agreement provides
adequate protections for Conrail's employees and for local communities in
Pennsylvania.
(v) The fact that several of the conditions to the Norfolk Offer can
only be satisfied if the Conrail Board takes certain actions, which as
described above the Conrail Board agreed not to take until after November
30, 1997 and thereafter only if certain conditions are satisfied.
ITEM 9. MATERIALS TO BE FILED AS EXHIBITS.
Item 9 of the Schedule 14D-9 is hereby amended and supplemented by adding
the following text thereto:
<TABLE>
<C> <S>
(a)(29) Text of press release issued by Conrail dated March 3, 1997.
+(a)(30) Supplement to the Offer to Purchase dated March 7, 1997 (incorporated by
reference to Exhibit (a)(32) to the CSX 14D-1).
(a)(31) Text of press release issued by Conrail dated March 7, 1997.
+(a)(32) Letter to shareholders dated March 7, 1997.
+(a)(33) Opinion of Lazard Freres & Co. LLC dated March 7, 1997.
+(a)(34) Opinion of Morgan Stanley & Co. Incorporated dated March 7, 1997.
(c)(14) Third Amendment dated as of March 7, 1997 to the Agreement and Plan of Merger
(incorporated by reference to Exhibit (c)(12) to the CSX 14D-1).
(c)(15) Form of Amended and Restated Voting Trust Agreement (incorporated by reference to
Exhibit (c)(13) to the CSX 14D-1).
</TABLE>
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+ Included in materials mailed to shareholders of Conrail.
4
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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/ JOHN A. MCKELVEY
------------------------------------
Name: John A. McKelvey
Title: Senior Vice
President -- Finance
Dated as of March 7, 1997
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE NO.
- --------- ------------------------------------------------------------------------ --------
<C> <S> <C>
*(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 CSX 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.........
*(a)(14) Text of advertisement published by Conrail and CSX on December 10,
1996....................................................................
*(a)(15) Text of advertisement published by Conrail and CSX on December 12,
1996....................................................................
*(a)(16) Text of joint press release issued by Conrail and CSX dated January 9,
1997....................................................................
*(a)(17) Text of joint press release issued by Conrail and CSX dated January 13,
1997....................................................................
*(a)(18) Text of joint press release issued by Conrail and CSX dated January 15,
1997....................................................................
*(a)(19) Text of press release issued by Conrail dated January 19, 1997..........
*(a)(20) Text of press release issued by Conrail dated January 22, 1997
(incorporated by reference to Exhibit (a)(26) to the Norfolk 14D-9).....
*(a)(21) Text of press release issued by Conrail dated January 23, 1997
(incorporated by reference to Exhibit (a)(27) to the Norfolk 14D-9).....
*(a)(22) Text of press release issued by Conrail dated January 28, 1997
(incorporated by reference to Exhibit (a)(24) to the Norfolk 14 D-9)....
*(a)(23) Text of joint advertisement published by Conrail and CSX on January 29,
1997....................................................................
*(a)(24) Text of press release issued by Conrail on January 31, 1997.............
*(a)(25) Text of joint press release issued by Conrail, CSX and Norfolk on
January 31, 1997........................................................
*(a)(26) Text of press release issued by Norfolk dated February 10, 1997.........
*(a)(27) Text of press release issued by Conrail dated February 10, 1997.........
*(a)(28) Text of press release issued by CSX dated February 14, 1997.............
(a)(29) Text of press release issued by Conrail dated March 3, 1997.............
(a)(30) Supplement to the Offer to Purchase dated March 7, 1997 (incorporated by
reference to Exhibit (a)(32) to the CSX 14D-1)..........................
(a)(31) Text of press release issued by Conrail dated March 7, 1997.............
(a)(32) Letter to shareholders dated March 7, 1997..............................
</TABLE>
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<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE NO.
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<C> <S> <C>
(a)(33) Opinion of Lazard Freres & Co. LLC dated March 7, 1997..................
(a)(34) Opinion of Morgan Stanley & Co. Incorporated dated March 7, 1997........
*(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
Solicitation/ Recommendation Statement on Schedule 14D-9 of Conrail
dated November 6, 1996, as amended, relating to the Norfolk Offer)......
*(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)...............................
*(c)(12) Text of opinion of Judge Donald VanArtsdalen of the United States
District Court for the Eastern District of Pennsylvania as delivered
from the bench on January 9, 1997.......................................
*(c)(13) Text of STB Decision No. 5 of STB Finance Docket No. 33220 dated January
8, 1997.................................................................
(c)(14) Third Amendment dated as of March 7, 1997 to the Agreement and Plan of
Merger (incorporated by reference to Exhibit (c)(12) to the CSX
14D-1)..................................................................
(c)(15) Form of Amended and Restated Voting Trust Agreement (incorporated by
reference to Exhibit (c)(13) to the CSX 14D-1)..........................
</TABLE>
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* Previously filed
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EXHIBIT (a) (29)
Conrail Board Acts on Stay Bonuses,
Enhanced Severance Packages
In Event Of Acquisition Of Company
PHILADELPHIA, March 3, 1997 - Conrail (NYSE:CRR) announced today that
its Board of Directors has taken action with respect to stay bonuses and
enhanced severance packages to protect Conrail employees not covered by
collective bargaining agreements in the event of an acquisition of the Company.
The Board was mindful that employees covered by collective bargaining
agreements may qualify for up to six years' protection under federal law.
While the Board expressed its disappointment that recent events
indicate that all the strategic goals reflected in the Merger Agreement with
CSX may not be attainable, the Board expressed confidence that the final
resolution will be beneficial to all the Company's constituencies. In light of
these developments, the Board also authorized its management and
representatives to negotiate amendments to the CSX merger agreement that would
assure that the Conrail shareholders receive $115 in cash per share at the
earliest possible date.
Conrail, with corporate headquarters in Philadelphia, operates an
11,000 mile rail freight network in 12 Northeastern and Midwestern states, the
District of Columbia, and the Province of Quebec.
Contact: Craig MacQueen of Conrail Corporate Communications, (215)
209-4594, or Dan Katcher/Joelle Frank of Abernathy MacGregor Group, (212)
371-5999. Conrail releases are archived on the World Wide Web:
http://www.conrail.com.
<PAGE> 1
EXHIBIT (a)(31)
FOR IMMEDIATE RELEASE
CONTACTS:
Conrail Inc. Abernathy MacGregor Group
Craig R. MacQueen Joele Frank/Dan Katcher
(215) 209-4594 (212) 371-5999
CONRAIL SHAREHOLDERS TO RECEIVE $115 IN CASH PER SHARE
UNDER AMENDED CSX-CONRAIL MERGER AGREEMENT
Philadelphia, PA (March 7, 1997) -- Conrail Inc. (NYSE:CRR) announced
today that Conrail and CSX Corporation (NYSE:CSX) have amended their merger
agreement to increase the consideration to $115 in cash per Conrail share for
all remaining outstanding shares of Conrail's common and ESOP preferred stock.
Under the terms of the amended merger agreement (and subject to the terms and
conditions thereof), Conrail shareholders will receive, no later than June 2,
1997, $115 in cash per Conrail share through a CSX tender offer. All the Conrail
stock acquired by CSX in the tender offer would be placed in a voting trust
pending the outcome of the Surface Transportation Board's proceeding.
David M. LeVan, chairman, president and chief executive officer of
Conrail, said "Our amended merger agreement with CSX provides unprecedented
value to Conrail shareholders and provides that they will be paid in under 90
days without regulatory risk. We have also worked to fully protect the Conrail
employees who have made this railroad great. Stay bonuses and enhanced severance
arrangements have been implemented to protect those Conrail employees not
covered by collective bargaining agreements. In addition, we have received
assurances from CSX that there will be a substantial commitment to Pennsylvania.
CSX intends to have a major operating presence in Philadelphia and intends to
maintain Conrail's Pittsburgh service center and the shops at Altoona and
Hollidaysburg."
"Conrail's board and management would have preferred for the Conrail
system to remain intact. However, under the circumstances as they developed, we
have succeeded in negotiating the best possible transaction for all of
Conrail's constituencies," Mr. LeVan concluded.
Under the amended agreement, senior members of the management of Conrail
and CSX will lead a team to ensure an orderly process throughout the transition
period. Three of Conrail's directors will also be invited to join the CSX board.
<PAGE> 2
It is anticipated that CSX and Norfolk Southern will negotiate an
appropriate division of Conrail's assets; however, the CSX-Conrail amended
agreement is not conditioned upon CSX reaching agreement with Norfolk Southern.
The amended agreement is also not subject to financing.
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.
<PAGE> 1
[CONRAIL LOGO]
EXHIBIT (a)(32)
March 7, 1997
Dear Shareholders:
Conrail Inc. and CSX Corporation have agreed to modify our merger agreement
to provide that Conrail shareholders will receive $115 in cash for each
outstanding share of Conrail common stock and ESOP preferred stock. Pursuant to
the amended agreement, CSX will amend its tender offer to offer to pay $115 in
cash for each outstanding share, and will provide that the tender offer will
expire no later than June 2, 1997. Following consummation of the CSX tender
offer, CSX will consummate the merger in which Conrail's shareholders will
receive $115 in cash for each remaining Conrail share.
Our amended merger agreement provides unprecedented value to Conrail
shareholders and provides that they will be paid in under 90 days without
regulatory risk. We have also worked to fully protect the Conrail employees who
have made this railroad great. Stay bonuses and enhanced severance arrangements
have been implemented to protect those Conrail employees not covered by
collective bargaining agreements. In addition, we have received assurances from
CSX that there will be a substantial commitment to Pennsylvania. CSX intends to
have a major operating presence in Philadelphia and intends to maintain
Conrail's Pittsburgh service center and the shops at Altoona and Hollidaysburg.
Conrail's board and management would have preferred for the Conrail system
to remain intact. However, under the circumstances as they developed, we have
succeeded in negotiating the best possible transaction for all of Conrail's
constituencies.
Under the amended agreement, senior members of Conrail and CSX will lead a
team to ensure an orderly process throughout the transition period. Three of
Conrail's directors will also be invited to join the CSX board.
It is anticipated that CSX and Norfolk Southern will negotiate an
appropriate division of Conrail's assets; however, the CSX-Conrail amended
agreement is not conditioned upon CSX reaching agreement with Norfolk Southern
nor is it subject to financing.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE CSX TENDER OFFER AND
MERGER AND RECOMMENDS THAT CONRAIL SHAREHOLDERS ACCEPT THE CSX TENDER OFFER AND
TENDER THEIR SHARES IN SUCH OFFER.
The enclosed Supplement to the Offer to Purchase prepared by CSX and the
Amendment to the Schedule 14D-9 prepared by Conrail describe the terms of the
revised CSX tender offer. I urge you to consider all such information carefully.
Sincerely,
/s/ David M. LeVan
DAVID M. LEVAN
Chairman, President and
Chief Executive Officer
<PAGE> 1
Exhibit (a)(33)
LAZARD FRERES & CO. LLC
30 ROCKEFELLER PLAZA
NEW YORK, N.Y. 10020
- ----------------------------------------------------
TELEPHONE (212) 632-6000
FACSIMILE (212) 632-6060
NEW YORK
March 7, 1997
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 of December 18, 1996 and as further amended as of March 7, 1997
(collectively the "Merger Agreement"). Pursuant to the Merger Agreement, on
November 21, 1996, Tender Sub accepted for payment pursuant to an offer to
purchase 19.9% of the outstanding Shares at a price of $110.00 per share net in
cash. The terms of the Merger Agreement provide, among other things, that (i)
Tender Sub will offer to purchase (the "Offer") and, if certain conditions are
satisfied, accept for payment, each outstanding Share at a price of $115.00 per
share net in cash (the "Offer Consideration") and (ii) following consummation of
the Offer, subject to, among other things, the favorable required vote of
holders of Shares (if necessary), pursuant to the Merger (as defined in the
Merger Agreement), 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 $115.00 per share net in cash (the "Merger Consideration" and, together
with the Offer Consideration, 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 dated October 14, 1996 between Company
and CSX (the "Option Agreement") pursuant to which CSX was granted the
right to purchase shares of Common Stock (the "Option Shares");
(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 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
<PAGE> 2
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 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. We were not requested to, and did not, solicit third party offers to
acquire all or any part of the Company.
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 February 12, 1997, Norfolk Southern Corporation commenced a
tender offer (the "NSC Offer") for all of the outstanding Shares at a price per
Share of $115 net in cash. 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. Accordingly, at your request, in
rendering our opinion, we did not address the relative 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
------------------------------------
Managing Director
2
<PAGE> 1
Exhibit (a)(34)
MORGAN STANLEY
MORGAN STANLEY & CO.
INCORPORATED
1585 BROADWAY
NEW YORK, NEW YORK 10036
(212) 761-4000
March 7, 1997
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 of December 18, 1996 and as
further amended as of March 7, 1997 (collectively, the "Merger Agreement").
Pursuant to the Merger Agreement, on November 21, 1996, Acquisition Sub accepted
for payment pursuant to an offer to purchase 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 terms of the Merger Agreement provide, among other things,
that: (i) Acquisition Sub will offer to purchase (the "Offer") and, if certain
conditions are satisfied, accept for payment each outstanding Share at a price
of $115.00 per share net in cash (the "Offer Consideration"); and (ii) following
consummation of the Offer, upon the receipt of certain shareholder approvals (if
necessary) and satisfaction of other conditions thereto, pursuant to the Merger
(as defined in the Merger Agreement and the "Merger" together with the Offer,
the "Transaction"), 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 $115.00 per share net in cash (the "Merger
Consideration," and the Merger Consideration, together with the Offer
Consideration, the "Consideration").
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;
(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;
<PAGE> 2
(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. 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 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 any shareholders'
meeting held in connection with the Merger. As you know, on February 12, 1997,
Norfolk Southern Corporation commenced a tender offer (the "NSC Offer") for all
of the outstanding Shares at a price per Share of $115 net in cash. 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.
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
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
2
