并购创造价值

Basic Industry
Railroads

CSX Corp.
Conrail Inc.

Rating: HOLD (Moderate Risk)

Company Update

Brian R. Routledge, CFA

[phone]

CSX (46 1/2)—NYSE
CRR (85 3/4)—NYSE

CSX announces merger proposal with
Conrail.
Longer-term benefits balanced against near-term uncertainties.
Lowered CSX rating to Hold given earnings dilution over the near-term.
October 18, 1996

Earnings Per Share
Fiscal Year Ending

Shares
P/E

O/S

Ind.

52Week

12/95
CSX

12/96E

12/97E

12/97E

Div.

Yield

(Mil.)

Range

$3.46

$4.00

$4.25

10.9X

$1.04

2.2%

212

53-41

4.10

4.50

$5.00

$5.75

15.0X

$1.90

2.2%

86

88-52

Old
CRR
Old
DJIA:

$4.70

S&P 400:

6059.20
835.40

Priced as of the close, October 17, 1996.

CSX Announces Merger With Conrail—CSX Now Rated Hold Given
Near-Term Uncertainties
We lowered our rating on CSX from Buy to Hold following its October 15 merger proposal with
Conrail. While we think the proposed merger with Conrail provides potentially significant long-term benefits, we believe the earnings dilution and regulatory uncertainty may keep a lid on the shares over the near term. CSX is paying a hefty price for Conrail of almost 10 times earnings before interest and taxes compared to multiples of 7-9 times in other recent railroad transactions. As a result, we believe the benefits from the merger may not begin to accrue until
1999, which is too distant a time horizon on which to base a Buy recommendation. We think the CSX story has changed from a company with relatively predictable earnings growth over the next 12-18 months and a cheap valuation, to one with little earnings visibility over the next
18-24 months. We would need more confidence of the magnitude and timing of the potential benefits to earnings before reinstating our Buy rating.

Earnings Dilution May Last For 18-24 Months. We think that the merger could be dilutive to CSX's earnings