ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Wednesday, October 16, 1996 TAG: 9610160051
SECTION: NATIONAL/INTERNATIONAL PAGE: A-1 EDITION: METRO
DATELINE: PHILADELPHIA
SOURCE: Associated Press
CSX Corp. has agreed to buy Conrail Inc. for $8.4 billion in a deal that would create a freight network that would dominate the rail industry east of the Mississippi.
The deal, if approved by regulators and stockholders, would combine a descendant of America's first railroad and a carrier that the government stitched together out of the old Penn Central and other bankrupt companies.
CSX and Conrail both compete with Norfolk Southern Corp., operator of 14,500 miles of track. Earlier this year, NS was widely rumored to be interested in buying Conrail.
Both NS and CSX tried to buy Conrail in the 1980s and NS' bid was supported by the federal Transportation Department.
NS executives attending a conference on the Virginia coal industry at the Hotel Roanoke & Conference Center on Tuesday were surprised by the early-morning announcement.
"The competition may change; we'll have to understand that a little better," said Bill Fox, NS' vice president of coal marketing. A merger could alter the competitive situation for NS' coal business, Fox explained, because the types of coal that CSX and Conrail normally haul are different and might complement each other in the market.
The combined CSX-Conrail rail system would be the nation's third-largest, with 29,645 miles of track stretching from Chicago and New Orleans to Boston, New York and Miami.
It would be surpassed by Burlington Northern, which bought Santa Fe in 1995, and Union Pacific, whose purchase of Southern Pacific was approved this year. Those two railroads have more than 30,000 miles of track each, mostly in the West, Midwest and Southeast.
With a combined work force of 52,000, CSX and Conrail said Tuesday that jobs will be lost when the railroads combine operations, but they gave no specifics. They said they expect to realize $550 million in cost savings and higher traffic from the merger.
``Our new company will provide new single-line rail service to major markets east of the Mississippi,'' said John W. Snow, CSX chairman.
Stephen FitzGerald, a spokesman for the Brotherhood of Locomotive Engineers, said the union will fight any union job cuts. However, he noted that in most railroad mergers, job losses affect mostly nonunion employees.
Snow said if the combination is completed, the new company will shift freight traffic off commuter and Amtrak lines linking Philadelphia, Baltimore and Washington to existing CSX tracks.
CSX, based in Richmond, Va., traces its roots to the early 19th century charter of the Baltimore & Ohio Railroad, the first railroad in North America. It operates more than 18,000 miles of track running through 20 states in the East, Midwest, South, and in Ontario, Canada.
In addition, its Sea-Land Service division operates 105 container ships that brought in 38 percent of last year's revenues.
Conrail, based in Philadelphia, was created by the government in the 1970s to buy Penn Central and other bankrupt railroads of the Northeast and Midwest. It was sold to the public in 1987 and now operates an 11,000-mile freight network in 12 Northeast and Midwest states, and Quebec, Canada.
When Congress decided to return Conrail to the private sector, NS was the low bidder but failed to get key congressional support for the purchase.
The deal would give Conrail shareholders $92.50 in cash and CSX stock for each of their shares. Conrail was valued at about $15 a share when it was sold to the public in 1987.
NS headquarters in Norfolk said Tuesday that the proposed merger raises serious concerns and holds "very serious implications for the nation's transportation system and for the shipping public."
NS said it planned to be involved in the merger process and didn't rule out any options, implying possible legal intervention in the proposed merger or possibly a move to top CSX's bid for Conrail.
"Norfolk Southern will act responsibly and aggressively to protect the interests of the shipping public, our shareholders and employees and the communities we serve," the NS statement said.
Rumors have proliferated during the 1990s about merger talks between NS and Conrail but NS has never confirmed nor denied that they were ever held. NS still won't comment on those rumors, NS spokesman Bob Fort said Tuesday.
Staff writer Greg Edwards contributed to this story.
LENGTH: Medium: 84 lines ILLUSTRATION: PHOTO: 1. File/1994. CSX and Conrail compete with Norfolkby CNBSouthern Corp. Earlier this year, NS was rumored to be interested in
buying Conrail. 2. (headshot) Snow. color. Chart by AP. color.