THE VIRGINIAN-PILOT
Copyright (c) 1997, Landmark Communications, Inc.
DATE: Tuesday, February 11, 1997 TAG: 9702110280
SECTION: BUSINESS PAGE: D2 EDITION: FINAL
SOURCE: BY CHRISTOPHER DINSMORE, STAFF WRITER
LENGTH: 74 lines
In an expected gambit, Norfolk Southern Corp. said Monday it will move to replace most of Conrail Inc.'s board of directors at the Philadelphia-based railroad's next annual meeting.
Norfolk Southern wants to install a board of directors that will be more sympathetic to its $10.3 billion offer for Conrail. Conrail, which has agreed to merge with Richmond-based CSX Corp. for $9.5 billion, has spurned Norfolk Southern's higher offer for four months.
Monday's move will likely increase pressure on Conrail and CSX to negotiate a settlement with Norfolk Southern that would likely break up Conrail. The two sides agreed to talks two weeks ago.
Norfolk-based Norfolk Southern was forced to try to replace Conrail directors, Norfolk Southern Chairman David R. Goode said.
When Conrail recently scheduled the meeting for Dec. 17, it triggered a by-law that requires shareholders to submit nominations and proposals within 10 days. Conrail has historically held its annual meetings in May.
``We would have preferred waiting to submit these proposals, especially now that both CSX and Conrail have agreed to meet and discuss the issues facing us,'' Goode said. ``However, Conrail's recent action to delay the shareholders' meeting as long as possible imposed a very short deadline on its own shareholders, and we had to act to protect shareholder interests.''
Conrail shareholders gave Norfolk Southern a stunning victory in January when they rejected by a wide margin a proposal to allow the merger with CSX.
If Norfolk Southern can sustain shareholder interest in its higher offer, it may succeed in its proxy fight to replace the board.
Norfolk Southern has nominated five new members for Conrail's board. It wants to retain three board members. It has also proposed reducing the board's size to eight from 13 and ``declassifying'' the board, which would mean all Conrail directors are elected annually rather than its current staggered system.
In a statement, Conrail asserted that it will take more than one annual meeting to replace its board. It also said Norfolk Southern's proposals are illegal under Pennsylvania and federal law.
``Norfolk Southern's proposals to remove incumbent directors without cause prior to the expiration of the terms to which they have been elected and to reduce immediately the size of the Conrail board are invalid under Pennsylvania law,'' Conrail said in a statement.
Among the directors that the Norfolk Southern proposal would remove are Conrail Chairman David R. LeVan and retired Conrail Chairman James A. Hagen.
LeVan is widely seen as one of the chief impediments to Norfolk Southern's takeover offer. Under the CSX merger, LeVan, who has been insisting on keeping Conrail together, is getting a big pay raise and would succeed CSX Chairman John Snow.
Norfolk Southern also announced Monday that it will begin paying today for the 8.2 million shares of Conrail accepted under its $943 million tender offer for a 9.9 percent stake in the railroad. ILLUSTRATION: Graphic
Norfolk Southern's proposed Conrail board
Retains:
Daniel B. Burke, chairman and owner of Portland, Maine Baseball
Inc., retired president, CEO of Capital Cities/ABC Inc.
David B. Lewis, chairman of the law firm Lewis, Whit & Clay
John C. Marcus, retired chairman and CEO of Westinghouse Electric
Corp.
Nominees:
George A. Butler, retired president of Philadelphia-based
CoreStates Financial Corp.
Stephen P. Lamb, partner of Wilmington, Del., law firm Lamb &
Bouchard
Mary Patterson McPherson, president of Bryn Mawr College in Bryn
Mawr, Pa.
Bernard C. Watson, chairman of HMA Foundation in Philadelphia
J. Roger Williams Jr., of counsel to the Philadelphia law firm
Dilworth, Paxson, Kalish & Kauffman
KEYWORDS: NORFOLK SOUTHERN CONRAIL