DATE: Saturday, May 31, 1997                TAG: 9705310320

SECTION: BUSINESS                PAGE: D1   EDITION: FINAL 

SOURCE: BY CHRISTOPHER DINSMORE, STAFF WRITER 

                                            LENGTH:   55 lines

BOARD SETS 350 DAYS TO REVIEW CONRAIL DEAL

Norfolk Southern and CSX won't be able to take over Conrail until at least next June.

The federal Surface Transportation Board set a 350-day schedule to review the two Virginia railroads' pending application for control of Conrail Inc. and its Northeastern freight rail network. The decision was released Friday.

The clock will begin ticking when Norfolk Southern Corp. and CSX Corp. formally file their takeover application. They plan to file with the STB on June 16.

The two railroads had sought a 255-day schedule for the federal review, but the STB concluded that it needed the extra time to fully consider all the issues raised by the break-up of Conrail, said Dennis Watson, STB spokesman.

The board had taken 255 days to review the 1996 merger of Union Pacific Corp. and Southern Pacific Rail Corp.

``We obviously would have preferred 255 days,'' said Robert Fort, spokesman for Norfolk-based Norfolk Southern. ``At least there's some certainty to the schedule now. . .

``At least 350 days is less than 485 days,'' Fort added.

Some rail labor unions had sought a 485-day schedule for the review. A trucking group, some shippers and the Canadian railroads also sought to keep the review on a slow track.

Friday's decision marks the beginning of the regulatory phase of

Conrail's takeover.

Earlier this week Norfolk Southern and CSX acquired 96 percent of Conrail's stock in a $10.2 billion conclusion to a takeover battle that started in October.

Conrail agreed to an $8.4-billion merger with CSX on Oct. 15. Norfolk Southern, which had long coveted Conrail, offered $1 billion more a week later. It kicked off a vicious corporate war fought from board rooms to court rooms.

As the bids went up, Conrail management persisted in wanting to merge with CSX, but Conrail shareholders blocked such a merger in a Jan. 17 vote. About that time Linda Morgan, the STB chairman, urged the three railroads to compromise, suggesting the board might divide Conrail's routes anyway.

Conrail capitulated in March, agreeing to be carved up between Norfolk Southern and CSX. The two Virginia railroads reached an agreement in April under which Norfolk Southern would get 58 percent of Conrail for $5.9 billion, while CSX paid $4.3 billion for the remainder.

The division will establish two relatively equal railroads competing throughout the East.

While Norfolk Southern wanted a shorter schedule, the STB's 350-day review shouldn't affect the railroad's expectations of the takeover, Fort said.

One reason the board is sticking with a longer schedule is it wants to prepare a full environmental impact statement on the merger. In this case environmental impact includes the effect on intercity passenger rail service and commuter rail service, the STB said. KEYWORDS: CONRAIL CSX NORFOLK SOUTHERN

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