The Acquisition of Consolidated Rail Corporation Sample Essay

1. Why does CSX want to purchase Conrail? How much should CSX be willing to pay for it? 1. If the CSX buys Conrail. this combination would make the 2nd largest rail system in the United States and the largest rail system E of the Mississippi River. The new company would acquire the $ 8. 5B in rail gross and about 70 % of the Eastern Market. which means it would hold monopoly place in the Eastern Rail Market. 2. The combined rail webs would ease long-haul. immediate. and. hence. low-priced service between the Southern ports. the Northeast. and the Midwest. 3. In the short-haul paths between the Midwest and the South. CSX-Contrail would go more competitory through cost decrease.

When I calculate the monetary value which CSX is willing to pay for Conrail. There are two parts. First. there is a synergism which means when the merge happens. the cost will cut down and the gross will increase. For this portion. I can acquire the monetary value should be $ 83. 71 harmonizing to the combined additions of runing income. Then. if Norfolk Southern purchases Conrail. some gross of CSX will reassign to the Norfolk Southern. In this manner. there is a possible loss. For this portion. the monetary value should be $ 23. 45. As a consequence. the entire monetary value which CSX should pay for the Conrail is $ 107. 16. There are more inside informations in the signifier 1. 2. Why did CSX do a two-tiered offer? What consequence does this construction have on the dealing? In this two-tiered offer. CSX would pay $ 92. 50 per portion in hard currency for the first 40 % of Conrail’s acquisition portions and would interchange portions in the ratio of 1. 85619:1. 0 for the staying 60 % . There are some advantages. First. CSX merely pay 40 % of the Conrail portions in hard currency. In this manner. it does non necessitate to acquire excessively much hard currency for the portions. Then. when it exchanges portions. the blended value is $ 89. 07 per portion which is less than $ 92. 5. So it is inexpensive in the two-tiered offer.

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Harmonizing to the Pennsylvania’s Business Corporation Law. CSX proposed the two-tiered offer with different monetary value. so. Conrail stockholders would hold to “opt-out” of the Pennsylvania statue before CSX could buy more than 19. 9 % of the portions. This ordinance was the ground for put to deathing the front-end offer in two phases. At the clip of the ballot. CSX and employee trusts. which supported the amalgamation. would command 35. 5 % of the portions and would necessitate merely another 14. 6 % of the acquisition portions to vote in favour of opting-out for it to go through. 3. As a stockholder in Conrail. would you tender your portion to CSX at $ 92. 50 in the first phase stamp offer? Explain why or why non? I would tender my portion to CSX at $ 92. 5 in the first phase. Because if I would non tender my portion to CSX at $ 92. 50. I have to interchange the portions at the rate of 1. 85619:1. 0. However. the investors have bad outlook on this trade and the portion monetary value of CSX has fallen to $ 46. 75. In this manner. if I choose to sell my portions in the 2nd phase. I may have lower monetary value. As a consequence. I would tender my portion to CSX at $ 92. 5.


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