Case Study
The Conrail Acquisition

Prof. Ian Giddy, New York University

The Acquisition of Consolidated Rail Corp. (A) (HBS Case  9-298-006)

In mid 1996,  Pennsylvania-based Consolidated Rail Corp. (Conrail), the third largest railroad in the Eastern United States, was approached with a merger offer from Virginia-based CSX Corp., the largest railroad. This potential deal was part of an industry-wide trend toward consolidation and promised to change the competitive dynamics of the Eastern rail market. Investors were faced with the issue of whether to tender shares into the front-end of a two-tiered acquisition offer. To make this decision, one must value Conrail as an acquisition target and understand the structure of CSX's offer. This case study rovides an opportunity to value a large-scale acquisition using comparable transactions and discounted merger synergies. In addition, it illustrates the mechanics of a two-tiered offer and provides a glimpse of various anti-takeover provisions including poison pills, lock-up options, break-up fees, and no-talk clauses. 

  • What was the source of Conrail's problems? Could the company's value be increased through a merger?
  • What were Conrail's anti-takeover provisions?
  • How did the USX offer work?
  • How much of a premium could USX pay over the going market price?
  • Could Norfolk Southern make a bid? How? How much?
  • Does this change what CSX has to pay? | | | | contact
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