THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Saturday, October 26, 1996 TAG: 9610260268
SECTION: BUSINESS PAGE: D2 EDITION: FINAL
SOURCE: STAFF AND WIRE REPORT
LENGTH: 57 lines
There's one very good reason why Norfolk Southern Corp. has offered to consider moving its headquarters to Philadelphia from Norfolk if it's able to buy Conrail Inc.
A 23-year-old federal law dictates that Conrail be headquartered in the city.
On Wednesday Norfolk Southern topped a competing merger proposal for the northeastern rail company by its rival, CSX Corp. Norfolk Southern's hostile bid of $9.15 billion was at least $1 billion more than CSX's friendly offer.
As part of its agreement with Conrail, Richmond-based CSX plans to move its headquarters to the City of Brotherly Love.
In a suggestion that shocked business, political and social leaders in Hampton Roads, Norfolk Southern Chairman David R. Goode wrote in a letter to Conrail's board of directors: ``We are prepared . . . to consider locating the corporate headquarters of the combined company in Philadelphia.''
Norfolk Southern is using the issue of headquarters location to induce Conrail's board to consider its offer. Norfolk Southern's offices in downtown Norfolk employ 300 people, but the departure of the company would be a blow to the region's economic prestige and to the many cultural and charitable organizations in which the railroad's executives involve themselves. Norfolk Southern is the only company in the region included in the Fortune 500, an annual ranking of corporate giants.
The railroad also employs 1,500 people in the region who wouldn't be affected by moving the headquarters. They work in rail yards and at Norfolk Southern's coal terminal in Norfolk.
``We haven't said we're going to move anything,'' said Robert Fort, a Norfolk Southern spokesman.
The offer to move the headquarters is contingent on many other aspects of the takeover bid falling into place, Fort said.
The law that created Conrail may also be playing a role in Norfolk Southern's thinking. Congress formed Conrail from the remnants of six bankrupt railroads in 1973 to avoid a transportation crisis. The Pennsylvania congressional delegation played a major role in shaping the legislation that created Conrail as a government-owned company.
They were able to insert a line into the Regional Rail Reorganization Act of 1973 that reads: ``the principal office of the corporation or of its principal railroad operating subsidiary shall be located in Philadelphia.''
The federal government sold Conrail in 1987 in a public stock offering, but the provision and many other aspects of the law governing Conrail remain in effect, according to the Federal Railroad Administration.
A Pennsylvania congressman, Rep. Bud Shuster, has already scheduled a series of hearings to look at the impact of the proposals for Conrail. Shuster is chairman of the House Transportation and Infrastructure Committee.
As part of those hearings, Congress needs to review the special legislation related to the creation of Conrail and determine what changes need to be made, Shuster said in a statement. MEMO: The Richmond Times-Dispatch contributed to this report.
KEYWORDS: MERGER CONRAIL CSX NORFOLK SOUTHERN by CNB