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1 page/β‰ˆ275 words
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2 Sources
Style:
Harvard
Subject:
Business & Marketing
Type:
Coursework
Language:
English (U.S.)
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Topic:

Conrail Merger Transactions

Coursework Instructions:

The primary objective of this case is to understand merger transactions

The following is a list of questions that may help you analyze the case, but you don’t have to limit your analysis to them. 1. Why is CSX interested in acquiring Consolidated Rail Corporation (Conrail)? Describe the arguments for the offer being motivated by synergies, as well as arguments for the motivation to pre-empt a bid by Norfolk 2. How much is CSX effectively offering per Conrail share? Using Multiples valuation, what is the value of Conrail to CSX? Incorporate the estimated synergies in this value. Describe clearly which multiples you use and why and describe which comparison firms you use and why. How does this value compare to the offer made by CSX? 3. Why did CSX make a two-tiered offer? For the shareholders of Conrail, does this make a difference relative to an all cash offer? 4. Why did Norfolk Southern make a hostile bid for Conrail? 5. In a bidding war for Conrail, who should be willing to pay more, Norfolk South-ern or CSX? 6. As a shareholder, would you vote to opt-out of the Pennsylvania anti-takeover statute? What do the capital markets expect will happen?

Coursework Sample Content Preview:


Conrail A and B Case Questions
Name
Course
Institution
Date
Conrail A and B Case Questions
1 Why CSX was interested in acquiring Consolidated Rail Corporation (Conrail)
CSX had some reasons to motivate its interest to acquire Conrail. The first reason was synergy potential. The acquisition would lead to a more extensive and efficient railway system that would also improve transit times while reducing operational costs. The acquisition would also create a larger market share for CSX. It is worth noting that with a 41% share in the US freight by 1995, railroads were highly profitable (Esty, 2005). The intent to buy was also strategic as CSX had pre-empted a bid for Conrail from Norfolk Southern.
2 The value of Conrail as per CSX’s bid
There are specific steps followed in conducting this multiple valuation. The first step was identifying comparable companies (Petitt, 2013). The comparative analysis is conducted based on the railroad productivity data (revenue per employee) from Conrail ($156,784), CSX ($163,151), Norfolk Southern ($193,690), and Union Pacific ($188,623) (Esty, 2005). The second step is gathering the financial information. Notably, CSX offered $100 per share at the time. The third step

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