Why Did Xx Want To Buy Conrail
1. Why does CSX want to buy Conrail? How much should CSX be willing to pay?
After passing the Stagger’s Rail Act of 1980, railroad companies had possibility to close the unprofitable lines, determine the price and make mergers with other companies. Right after these drastic alterations, key measure of profitability analysis, which is operating ratio, decreased significantly from 93.3% to 80.0 %. Overall, efficiency in this sector increased, and railroads again turned to be competitive against the truck industry.
Since the railroad market was mature, further efficiency increases can mostly be done through mergers. If CSX and Conrail would merge up, created entity will result in at least 8.5 billion revenues, and possibly costs will decrease …show more content…
For the calculations, previous successful mergers and figures of Conrail in 1996 were used. Please refer to the Chart 1 in the Appendix and excel sheet for the detailed analysis.
2. Why did CSX make a two-tiered offer? Why did CSX want to do the first-tier transaction in two …show more content…
Nevertheless, we observe that still organizations might find the possibilities to remain legal and act in their best interest.
3. As a Conrail shareholder, would you tender your shares to CSX at $92.50 in the first stage offer? Why or why not?
As a Conrail shareholder, I would tender my shares to CSX at $92.50. First of all, the bid scheme by CSX organized in a way that it would offer higher price in the initial steps to get the required percentage ownership, then, probably lower price would be offered to make total bid valuable for the CSX. Uncertainty in the market is additional factor to be considered. Before the offer, Conrail shares sold at $71, albeit, it is offered $92.50 now, around 30% percent premium. Additionally, in the second stage offer, rather than cash, shareholders of Conrail would get 1.85619 shares of CSX per share they own at Conrail. To be a shareholder at CSX, owners need to be sure that synergies and cost efficiencies after the merger will work out and stock price of CSX will go higher than $46.75 to make their decision profitable. We observe there are a lot of open questions. After considering all these reasons, taking the hot cash of $ 92.50 per share and staying away would reasonable
After passing the Stagger’s Rail Act of 1980, railroad companies had possibility to close the unprofitable lines, determine the price and make mergers with other companies. Right after these drastic alterations, key measure of profitability analysis, which is operating ratio, decreased significantly from 93.3% to 80.0 %. Overall, efficiency in this sector increased, and railroads again turned to be competitive against the truck industry.
Since the railroad market was mature, further efficiency increases can mostly be done through mergers. If CSX and Conrail would merge up, created entity will result in at least 8.5 billion revenues, and possibly costs will decrease …show more content…
For the calculations, previous successful mergers and figures of Conrail in 1996 were used. Please refer to the Chart 1 in the Appendix and excel sheet for the detailed analysis.
2. Why did CSX make a two-tiered offer? Why did CSX want to do the first-tier transaction in two …show more content…
Nevertheless, we observe that still organizations might find the possibilities to remain legal and act in their best interest.
3. As a Conrail shareholder, would you tender your shares to CSX at $92.50 in the first stage offer? Why or why not?
As a Conrail shareholder, I would tender my shares to CSX at $92.50. First of all, the bid scheme by CSX organized in a way that it would offer higher price in the initial steps to get the required percentage ownership, then, probably lower price would be offered to make total bid valuable for the CSX. Uncertainty in the market is additional factor to be considered. Before the offer, Conrail shares sold at $71, albeit, it is offered $92.50 now, around 30% percent premium. Additionally, in the second stage offer, rather than cash, shareholders of Conrail would get 1.85619 shares of CSX per share they own at Conrail. To be a shareholder at CSX, owners need to be sure that synergies and cost efficiencies after the merger will work out and stock price of CSX will go higher than $46.75 to make their decision profitable. We observe there are a lot of open questions. After considering all these reasons, taking the hot cash of $ 92.50 per share and staying away would reasonable