INTERNAL MEMORANDUM Conrail
INTERNAL MEMORANDUM
TO: Norfolk Southern
FROM:
Date: October 15, 1996
Re: Regarding our Hostile Bid for Conrail Rail Corporation
Today, CSX Corporation(CSX) and Consolidated Rail Corporation (Conrail) announced an $8.3 billion merger, the first and third largest railroads in the Eastern United States. This merger would create the second largest rail system in the United States in the United states, and the largest rail system east of the Mississippi river by far. This merger has huge implication for the nations transportation and shipping industry, and especially will have a significant impact on our business profits and future sustainability. We must act aggressively to prevent this merger from happening. We are proposing a 9.1 Billion dollar offer to obtain Conrail, a scarce jewel in an industry where the number of firms are declining and mergers and consolidations are the keys to future success.
Conrail is currently the only Class 1 railroad serving a very lucrative Northeast market. Many industry professionals consider this a prized possession or sacred jewel. It currently controls 29.2% of the rail freight market easy of the Mississippi. Conrail also has the highest revenue per mile of track operated, most revenue per carload originated and per ton originated. However it is the least profitable due to high cost positions, including more employees and poor efficiency in comparison to CSX and us.
Due to this statistic it can be inferred that the company who mergers or acquires Conrail can generate considerable profits from synergies. Side by side comparisons for Norfolk Southern and CSX can be found below:
CSX
Norfolk Southern
Gains in Operating Income
$565 Million
$515 Million
Market Share
68%
61%
Total Rail Miles
29,047
24,845
Cost Reductions $165 Million
$145 Million
In an industry trending toward economies of scale being a critical success factor in cutting costs and increasing profits to stay profitable, neither company could afford to
TO: Norfolk Southern
FROM:
Date: October 15, 1996
Re: Regarding our Hostile Bid for Conrail Rail Corporation
Today, CSX Corporation(CSX) and Consolidated Rail Corporation (Conrail) announced an $8.3 billion merger, the first and third largest railroads in the Eastern United States. This merger would create the second largest rail system in the United States in the United states, and the largest rail system east of the Mississippi river by far. This merger has huge implication for the nations transportation and shipping industry, and especially will have a significant impact on our business profits and future sustainability. We must act aggressively to prevent this merger from happening. We are proposing a 9.1 Billion dollar offer to obtain Conrail, a scarce jewel in an industry where the number of firms are declining and mergers and consolidations are the keys to future success.
Conrail is currently the only Class 1 railroad serving a very lucrative Northeast market. Many industry professionals consider this a prized possession or sacred jewel. It currently controls 29.2% of the rail freight market easy of the Mississippi. Conrail also has the highest revenue per mile of track operated, most revenue per carload originated and per ton originated. However it is the least profitable due to high cost positions, including more employees and poor efficiency in comparison to CSX and us.
Due to this statistic it can be inferred that the company who mergers or acquires Conrail can generate considerable profits from synergies. Side by side comparisons for Norfolk Southern and CSX can be found below:
CSX
Norfolk Southern
Gains in Operating Income
$565 Million
$515 Million
Market Share
68%
61%
Total Rail Miles
29,047
24,845
Cost Reductions $165 Million
$145 Million
In an industry trending toward economies of scale being a critical success factor in cutting costs and increasing profits to stay profitable, neither company could afford to