Justice Dept. Backs Revised Norfolk Bid for Conrail

The Justice Department, satisfied that there are no antitrust problems, gave tentative approval Tuesday to Norfolk Southern Corp.’s revised $1.2-billion bid to buy the government’s 85% interest in the Conrail system.

In a brief statement, Assistant Atty. Gen. Douglas H. Ginsburg said Norfolk Southern’s plan to sell some of its tracks “appears on its face to address” the issue of whether, after any merger, there would still be rail competition in the Midwest and Northeast, where Conrail and Norfolk Southern now compete.

The tentative approval still awaits ratification after a detailed legal review and a field examination by the department’s antitrust division and an independent rail industry consultant, Ginsburg said.

Meanwhile, a rival group of 41 investors extended its offer for Conrail until June 30 in its effort to block the formation of what it contends would be a huge rail conglomerate. Under the rival plan, the consortium would buy Conrail and then resell it to the public through stock offerings over the next five years.

The consortium, put together last May by Morgan Stanley & Co., also enlisted the support of four key senators, who called on their colleagues to delay any action on the sale until next year.

The Senate Judiciary Committee is scheduled to conduct hearings Thursday on the proposed merger, which already has been approved by the Senate Commerce Committee and is backed by Transportation Secretary Elizabeth Hanford Dole and Senate Majority Leader Bob Dole (R-Kan.).

For months, Norfolk Southern has been negotiating with the department and two regional railroads, Guilford Transportation Industries and Pittsburgh & Lake Erie Railroad, over a plan to sell tracks to the two companies so that they could compete against a Norfolk Southern-Conrail system.

Two previous Norfolk Southern plans to sell track in Ohio, Indiana and Illinois to the smaller railroads had been rejected by department officials, who worried that neither acquiring company would be able to afford to operate the expanded trackage.

Details of the revised proposal approved Tuesday were not made available. But Capitol Hill aides familiar with the plan said it involved making Guilford and P≤ viable competitors by allowing them “friendly connections” with larger Western rail carriers and with competing Northeast carriers--including CSX Corp., a leading opponent of the Conrail-Norfolk Southern merger and a participant in the Morgan Stanley consortium.