Rail Acquisition Why does CSX want to buy Conrail? How much should CSX be willing to pay for it?

CSX wants to buy Conrail to acquire a larger portion of the Northeastern available rail lines as well as to increase its efficiency. CSX should be willing to pay slightly above the blended value, so about $90 per share.

Why did CSX make a two-tiered offer? What effect does this structure have on the transaction?

Two-tiered offers are common in such situations. They comprise of a first step in which an offer is made to purchase enough of the stockholders' shares. The second phase is the offering of other shares at a lower price. This strategy has the advantages of reducing both cheaper and less risky (in terms of losing out on the purchase).

As a shareholder in Conrail, would you tender your share to CSX at $92.50 in the first stage tender offer? Explain why or why not?

Yes, I would. This amount represents somewhat less than the current evaluation of the worth of the company. Conrail shareholders can reasonably expect that CSX will pay more than the share price per se since the merger will increase the value of the stock, and Conrail shareholders...

What are the economic rationales for and the takeover implications of the various provisions in the merger agreement, e.g. no-talk clause, lock-up options, break-up fee and poison pill shareholder rights plan?
A no-talk clause forbids any party to the tender to comment on it to prevent future potential buyers finding out details. A target company may offer a lock-up option to a white knight for her/him to buy sufficient equity to protect the company from takeover. A breakup fee must be paid by the target company if it backs out of the deal. A poison pill is the act of a target company's less attractive and so reduce the possibility of a takeover.

5. Why did Norfolk Southern make a hostile bid for Conrail?

Norfolk Southern officials knew that they would face much greater competition if the merger took place and calculated that a hostile bid was the only reasonable chance that they had to gain control of Conrail and thus reduce the chance of having its competitive position significantly worsened.

6. How much is Conrail worth? In a bidding war, who…