Consolidated Rail Corp Analysis
Acquisition of Consolidated Rail – Case Study
1. Background Info - Conrail
1.1. Formed from the remains of the six bankrupt North-eastern railroads in 1973
1.2. Earned its first profit in 1981- $39.2m on revenues of $4.2bn. Privatised through an IPO in 1987
1.3. Major player in North-eastern cities and their connection with major Mid-western hubs
1.4. In 1995, had 23,510 employees, operated 10,701 miles of track and controlled 29.4% of the eastern rail freight market
1.5. Financial indicators- 1995
1.5.1. Operating revenue - $3.7bn
1.5.2. Operating ratio – 79.9%
1.5.3. Revenues per employee - $156,784
1.5.4. P/E ratio – 12.9
2. Background Info – CSX
2.1. Virginia based diversified transportation company – intermodal services, ocean container shipping, barging, contract services and rail road services
2.2. Major player in the South-eastern and Midwestern states and Ontario
2.3. In 1995 had 29,537 employees, operated 18,645 miles of track and controlled 38.5% of the Eastern rail freight market
2.4. Financial indicators – 1995
2.4.1. Operating revenue - $4.8bn
2.4.2. Operating ratio – 76.7%
2.4.3. Revenues per employee - $163,151
2.4.4. P/E ratio – 11.6
3. Background Info – Norfolk Southern
3.1. NS is the most efficient and best managed railroad company in the US
3.1.1. Operating revenue - $4bn
3.1.2. Operating ratio of 73.5%
3.1.3. Revenues per employee - $193,690
3.1.4. P/E ratio – 15.3
3.2. Offered $1.6bn for Conrail in the past (mid 80s). Clearly very interested in acquiring the firm for strategic reasons:
3.2.1. Access in the South-eastern and Midwestern states and Ontario but lacks the presence in the North-eastern states which are considered industry’s prized possession.
3.3. Financially, healthier than CSX:
3.3.1. Leverage ratio is 33.6%, can assume more debt
3.3.2. Current ratio of 111.4 vs CSX 64.7
3.3.3. EPS of $5.44 vs CSX $2.94
4. Strategic rationale
4.1. The combined entity would result in more than $8.5bn of revenues and nearly 70% of the
1. Background Info - Conrail
1.1. Formed from the remains of the six bankrupt North-eastern railroads in 1973
1.2. Earned its first profit in 1981- $39.2m on revenues of $4.2bn. Privatised through an IPO in 1987
1.3. Major player in North-eastern cities and their connection with major Mid-western hubs
1.4. In 1995, had 23,510 employees, operated 10,701 miles of track and controlled 29.4% of the eastern rail freight market
1.5. Financial indicators- 1995
1.5.1. Operating revenue - $3.7bn
1.5.2. Operating ratio – 79.9%
1.5.3. Revenues per employee - $156,784
1.5.4. P/E ratio – 12.9
2. Background Info – CSX
2.1. Virginia based diversified transportation company – intermodal services, ocean container shipping, barging, contract services and rail road services
2.2. Major player in the South-eastern and Midwestern states and Ontario
2.3. In 1995 had 29,537 employees, operated 18,645 miles of track and controlled 38.5% of the Eastern rail freight market
2.4. Financial indicators – 1995
2.4.1. Operating revenue - $4.8bn
2.4.2. Operating ratio – 76.7%
2.4.3. Revenues per employee - $163,151
2.4.4. P/E ratio – 11.6
3. Background Info – Norfolk Southern
3.1. NS is the most efficient and best managed railroad company in the US
3.1.1. Operating revenue - $4bn
3.1.2. Operating ratio of 73.5%
3.1.3. Revenues per employee - $193,690
3.1.4. P/E ratio – 15.3
3.2. Offered $1.6bn for Conrail in the past (mid 80s). Clearly very interested in acquiring the firm for strategic reasons:
3.2.1. Access in the South-eastern and Midwestern states and Ontario but lacks the presence in the North-eastern states which are considered industry’s prized possession.
3.3. Financially, healthier than CSX:
3.3.1. Leverage ratio is 33.6%, can assume more debt
3.3.2. Current ratio of 111.4 vs CSX 64.7
3.3.3. EPS of $5.44 vs CSX $2.94
4. Strategic rationale
4.1. The combined entity would result in more than $8.5bn of revenues and nearly 70% of the