THE VIRGINIAN-PILOT
Copyright (c) 1997, Landmark Communications, Inc.
DATE: Saturday, February 1, 1997 TAG: 9702010303
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY CHRISTOPHER DINSMORE, STAFF WRITER
LENGTH: 57 lines
Norfolk Southern, CSX and Conrail agreed on at least one thing when they met Friday in Washington: Don't breathe another word about their negotiations to anyone.
``Conrail, CSX and Norfolk Southern have concluded their meeting and have agreed that no further details of the meeting or timing of future meetings will be announced,'' the three Eastern railroads said in a joint news release.
Yes, a joint news release. It's the first glimmer of agreement between the railroads since the bidding war for Conrail Inc. and its Northeastern freight rail network erupted in October.
Previous communications among the companies have been pointed, to put it mildly.
``They're probably making some progress,'' said Charles Vincent, a rail stock analyst with Philadelphia's PNC Financial Corp. ``Typically, in any situation where negotiations are delicate, there tends to be a blackout.''
Until now, Conrail has refused to even talk to Norfolk Southern, which bid $10.3 billion cash to break up a CSX/Conrail merger, now worth $9.6 billion.
The talks occurred the same day that the federal Surface Transportation Board announced that it would take 365 days to review the competing proposals for Conrail. The STB has sweeping powers to approve, reject or modify any railroad's proposed takeover of another.
If CSX files its application for control of Conrail by March 1 as expected, a takeover of Conrail could not occur until the second half of 1998. The board also said it would combine Norfolk Southern's competing application with CSX's so that a single proceeding will determine Conrail's fate.
Events two weeks ago precipitated Friday's talks. STB Chairman Linda Morgan hinted that the board would prefer a negotiated settlement establishing a competitively balanced rail system in the East. And Conrail shareholders voted down the proposed CSX merger by a wide margin.
Any resolution will likely give the surviving Eastern railroads access to Northeastern markets such as New York, which have been served exclusively by Conrail for more than 20 years.
``There's probably some very serious horse-trading going on,'' Vincent said. ``When they're done, they'll probably come out with an agreement that mollifies the loser.''
Norfolk Southern has been insisting that any resolution give Conrail shareholders $115 a share, the equivalent of its offer.
``Whether that is actually paid by Norfolk Southern is obviously subject to negotiations,'' said Henry C. Wolf, Norfolk Southern's chief financial officer.
Wolf's comments on Bloomberg Business radio news earlier this week indicate that Norfolk Southern is open to a deal in which it and CSX team up to buy Conrail and split its assets.
Conrail Chairman David R. LeVan had been insisting on keeping Conrail intact, but since Morgan's comments that seems unlikely to occur.
Norfolk Southern and CSX both boast rail networks blanketing the Southeast and Midwest. By splitting Conrail, they would become equally matched competitors throughout the East.