Norfolk Bid to Derail Conrail Deal Rejected

Railroad operator Norfolk Southern Corp. lost its bid to block Wednesday’s close of CSX Corp.’s tender offer for 19.9% of a rival’s stock, the first phase of CSX’s proposed $8.5-billion acquisition of Conrail Inc.

A three-judge panel at the U.S. 3rd Circuit Court of Appeals in Philadelphia rejected Norfolk Southern’s emergency injunction request late Wednesday.

The court left open the possibility it would consider an expedited appeal by Norfolk Southern and set a deadline of today for arguments.

But that appeal would come too late to stop the tender offer, which expired at 11:59 p.m. Wednesday.

“Despite Norfolk Southern’s continuing attempts to derail the merger of Conrail and CSX, we are committed to each other,” Conrail and CSX said in a statement after Wednesday’s ruling.

It was unclear what Norfolk Southern would hope to accomplish with an appeal.

Norfolk Southern’s only hope of capturing Conrail now could be to persuade shareholders not to opt out of a Pennsylvania law that prevents Conrail from accepting CSX’s two-tiered bid. That vote, scheduled for mid-December, will probably be the pivotal decision in the battle for Conrail.

CSX is offering $110 a share for the first 40% of Conrail, and 1.856 CSX shares for the rest, or $84.25 a share based on Tuesday’s closing stock price. Norfolk Southern bid $10 billion, or $110 a share.

Richmond, Va.-based CSX rose $1.625 to $47; Philadelphia-based Conrail rose 12.5 cents to $96.875; and Norfolk, Va.-based Norfolk Southern lost $1 to $88. All trade on the New York Stock Exchange.