DATE: Friday, February 28, 1997             TAG: 9702280580

SECTION: BUSINESS                PAGE: D1   EDITION: FINAL 

SOURCE: BY CHRISTOPHER DINSMORE, STAFF WRITER 

                                            LENGTH:   62 lines

CONRAIL STOCKHOLDERS SUE FIRM OVER MERGER THEY SAY NORFOLK SOUTHERN'S INTEREST IN THE COMPANY WAS NEVER MENTIONED.

A group of former Conrail Inc. stockholders have sued the company, alleging its top executive failed to disclose Norfolk Southern Corp.'s interest in buying the railroad.

The suit alleges that shareholders lost out when they sold their stock following an announcement last fall that Conrail agreed to merge with Richmond-based CSX Corp. The shareholders say Conrail directors and executives failed to tell them about Norfolk Southern's interest. The railroad later launched a competing bid for Conrail that has pushed its stock price up as much as 50 percent since Oct. 14.

Attorneys are seeking class-action status for the suit filed Feb. 18 in Philadelphia's U.S. District Court.

The suit was filed on behalf of Conrail shareholders, who sold the Philadelphia-based railroad's stock between Oct. 15 and Oct. 22.

Conrail's stock jumped from $71 a share on Oct. 14 to $84 3/4 on Oct. 22 following CSX and Conrail's announcement of their merger. On Oct. 23, Norfolk Southern launched a competing bid for Conrail that drove Conrail's stock price as high as $98.25 that day.

The suit alleges that Conrail Chairman David M. LeVan violated federal securities laws by issuing statements that failed to disclose Norfolk Southern's interest in buying or merging with Conrail, according to a statement by the law firms representing the shareholders.

``Conrail did not disclose the fact that Norfolk Southern had, over the last two years and as recently as September and October 1996, expressed its interest in merging with or acquiring Conrail,'' the statement said.

As a result, Conrail ``artificially depressed or suppressed the market price of Conrail common stock'' between Oct. 15 and Oct. 22 and sellers in that period lost out on future price gains, according to the statement.

Conrail's stock has since climbed as high as $107 3/4 a share as Norfolk Southern and CSX bid up their offers for Conrail.

Norfolk Southern is currently offering $10.3 billion, or $110 a share for Conrail. The CSX merger is worth $9.4 billion, or about $106 a share, to Conrail shareholders.

Conrail shareholders voted to block the merger with CSX in January, but Conrail has said it intends to hold another vote.

``We believe the suit is entirely without merit,'' said Bob Sullivan, a Conrail spokesman. He declined to elaborate.

The lawyers who filed the suit could not be reached for comment. The firms are Berger & Montague of Philadelphia and Bernstein Liebhard & Lifshitz of New York.

In its statement, Berger & Montague said it has recovered $1 billion for shareholders over more than 20 years. MEMO: (Staff Writer Christopher Dinsmore can be phoned at 757/446-2271

or e-mailed at dins(AT)pilotonline.com) ILLUSTRATION: Graphic

Step one: Conrail's stock jumped from $71 to $84 3/4 a share on

news of a CSX-Conrail merger.

Step two: That price reached $98.25 the day Norfolk Southern

launched its competing bid. KEYWORDS: LAWSUIT CONRAIL

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