ROANOKE TIMES 
                      Copyright (c) 1997, Roanoke Times

DATE: Wednesday, January 22, 1997            TAG: 9701220026
SECTION: EDITORIAL                PAGE: A-8  EDITION: METRO 

NORFOLK SOUTHERN'S VICTORY

THE WAR for Conrail, the dominant Northeastern railroad, is far from over. But Norfolk Southern won a big battle last week, when Conrail shareholders effectively blocked - at least for now - a management-backed bylaw change that might well have assured Conrail's friendly takeover by NS rival CSX.

One measure of the size of Norfolk Southern's victory is the infrequency with which shareholders defy management in American corporate life.

That, however, is what happened to Conrail management. The stunning rebuke was as much a victory for shareholder rights as for Norfolk Southern.

The basic explanation isn't hard to find. If you're Conrail management or a Conrail employee, the job guarantees in the CSX plan look like the better prospect. But if you're an independent Conrail shareholder, NS is offering the better deal - $1.1 billion more than CSX. Though the overall vote was close, more than 90 percent of the shares not controlled by CSX or by Conrail employees voted against Conrail management.

Presumably, something now must give, but what?

CSX, which already owns 20 percent of Conrail stock, says it won't sweeten its offer. NS has announced plans to buy 9.9 percent of Conrail stock, apparently to try to replace members of the anti-NS Conrail board. The Conrail board could adopt delaying tactics to pressure takeover traders - owners, by The Wall Street Journal's estimate, of some 30 percent of Conrail stock - to take the CSX deal rather than wait things out; for them, time is money.

Were a winner to emerge tomorrow, it's not clear exactly what would be won. CSX and NS, including its extensive Roanoke Valley operations, are the dominant Eastern railroads outside Conrail's Northeastern base. A takeover of Conrail by either may well require some divestiture to the other to comply with antitrust regulations.

Obviously, though, the railroad that gets Conrail will be in the engineer's seat. The shareholders' vote last week doesn't necessarily mean they'd prefer NS at the Conrail throttle. But it certainly suggests dissatisfaction with how current Conrail management is running the train.

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