THE VIRGINIAN-PILOT
Copyright (c) 1997, Landmark Communications, Inc.
DATE: Friday, January 3, 1997 TAG: 9701030539
SECTION: BUSINESS PAGE: D2 EDITION: FINAL
SOURCE: BY CHRISTOPHER DINSMORE, STAFF WRITER
LENGTH: 44 lines
CSX Corp. sold 85,000 shares Thursday of Conrail Inc., the railroad it is trying to buy, to block an argument by rival Norfolk Southern Corp. that CSX has already gained control of 20 percent of Conrail's stock.
Under Pennsylvania law, the buyer of at least 20 percent of a company's stock must pay the remaining shareholders the same for their shares. The law is designed to prohibit two-tiered buyouts like the one CSX has proposed.
The sale was disclosed in a filing with the Securities and Exchange Commission.
Norfolk Southern is struggling to snatch Conrail away from CSX with a hostile takeover bid worth $10.5 billion. CSX's merger offer is now worth about $9.1 billion. Whichever railroad wins Conrail will become the largest in the East.
Norfolk Southern has sued CSX and Conrail in Philadelphia's U.S. District Court. A hearing is to be held Thursday on Norfolk Southern's contention that CSX already controls 20 percent of Conrail's stock and therefore must pay the remaining shareholders at least $110 a share.
While CSX believes Norfolk Southern's claim is ``without merit,'' it made the sale to render the contention moot, according to the SEC filing.
Despite Thursday's sale, ``it is our contention that once you've crossed the threshold you can never turn back,'' said spokesman Robert Fort. ``The shareholders have a vested right to get $110 a share.''
CSX may not even be able to afford paying that much, railroad stock analysts have said.
A CSX spokesman could not be reached.
Norfolk Southern is arguing that the Conrail shares owned by Conrail's directors and executives, who support the CSX merger, should be added into CSX's stake.
CSX acquired 19.9 percent of Conrail's stock for $110 a share in a tender offer that closed in late November. It's offering $110 cash for an additional 20.1 percent of Conrail stock, but will pay a mix of stock worth nearly $94 a share for the remaining 60 percent.
Conrail shareholders will vote Jan. 17 on whether to allow Conrail to accept CSX's offer.
The sale cost CSX more than $935,000, as it sold, for about $99 a share, stock it had bought for $110.