Conrail G455: Corporate Restructuring Team 7 1) Why does CSX want to buy Conrail? In an industry beset by limited options to consolidate domestic rail traffic‚ CSX looked at Conrail as an avenue to increase market share and gain access to the North East rail network. With air travel‚ road travel and trucking taking an increasing share‚ significant revenue growth became difficult. As Conrail became profitable‚ Congress explored ways of privatizing it‚ giving CSX an opportunity to acquire Conrail
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Consolidated Rail Corporation 1. CSX wanted to merge with Conrail‚ because the consolidated company would have more than $8.5 billion in rail revenue and almost 70 % of the Eastern market. Gain in Operating Income from Cost Reduction would bring additional $370 million by the year 2000. Total gain from revenue increase would result in additional $180 million. And from the operating income would reach $550 million. Another important point in CSX-Conrail merger is the better competitive position in both long-haul
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Perspective: Conrail shareholder. 1. Why does CSX want to buy Conrail? How much should CSX be willing to pay? Some of the reasons why CSX wants to buy Conrail are‚ to increase the consolidation in the Railway industry. Further consolidation typically means lower cost for the consolidators fx because economies of scale and synergies and …. A consolidation also results in lower competition inside the industry‚ which typically follows with higher‚ or at least not lower‚ prices and therefore higher
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Bidding-War Context Copyright ©2002 Ian H. Giddy Corporate Financial Restructuring 3 Case Study: The Acquisition of Conrail Why merge Conrail and CSX? How was the CSX offer structured? How was Conrail’s resistance to an unfriendly bid structured? How would you‚ as a Conrail shareholder‚ react to the offer? What’s Conrail worth? Copyright ©2002 Ian H. Giddy Corporate Financial Restructuring 4 Gains from Conrail Acquisition? Rationale: Firm A should merge with Firm B if [Value of AB > Value
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the railroad industry‚ which resumed the mergers and acquisitions activity. The following analysis will investigate the economics of the offer for Consolidated Rail Corporation (Conrail) by CSX Corporation (CSX) and Norfolk Southern Corporation (Norfolk). The stand-alone bidders‚ CSX and Norfolk would value the target‚ Conrail‚ based on its fundamentals‚ however if both bidders are present they would enter price wars and legal battles‚ therefore this would inflate the offered price for the target. In
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CONRAIL CASE Question 1.a) Based on the information provided in the “A” case and especially in the Exhibit 7 the most that CSX should pay for Conrail should be $93.42 per share (calculations are attached hereto as Exhibit 1). I assumed that the correct or required discount rate to be used in the DCF analysis should be the CSX’s cost of equity which is 15.93%. Based in this analysis – which reflects the expected synergies arising from the deal - CSX could still justify an increase in its offer by
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Acquisition of Consolidated Rail Corp Part A 1.) On October 15‚ 1996‚ CSX Corporation (CSX) then ranked as the number one railroad in the Eastern United States and Consolidated Rail Corporation (Conrail) then ranked as the third largest railroad in the Eastern United States‚ announced the intent to undergo a friendly merger via a two-tiered transaction with an estimated value of $8.4 billion. During the 1980’s a trend towards the consolidation of railroad firms began as a result
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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
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UNDERSTANDING THE CASE PROCESS INTRODUCTION The purpose of this section is to help you to understand what a case is and how you‚ as a student of business‚ can more effectively prepare your answers and benefit from a case discussion. The material covered in this section includes: 1. Understanding what a case is. 2. Reading a case effectively. 3. Analysing and preparing for a case discussion. 4. Reporting your case findings. 5. Discussing the case. 1. Understanding what a case is. Socrates
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& PRESENT YOUR ESOURCING BUSINESS CASE MAY 17‚ 2011 Can’t attend ISM’s 96th annual International Supply Management Conference this week? Don’t worry; we have some helpful notes from the conference to share with you. Lauren Panza‚ managing director of the greater Atlanta area for Iasta‚ attended the presentation‚ “Indirect Purchasing: Getting a Seat at the Table” yesterday morning. The presentation outlined how to build and present a strong business case to executives for indirect sourcing projects
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