Tuesday, Jan. 21, 1997

Potential suitors offer big bucks for Conrail merger

By JIM KINNEY
Collegian Staff Writer

The long-discussed merger between Conrail and CSX Corporation has stopped in its tracks for now, but suitors are still lined up to buy the Philadelphia-based Conrail railroad company.

Collegian Graphic: Railroad Merger

Conrail shareholders voted Friday not to override a Pennsylvania anti-takeover statute, effectively putting a $9.4 million merger plan on hold. If the shareholders had voted to override the statute, CSX would have acquired more Conrail stock and the companies would have become unified by sometime next fall.

Norfolk Southern Corporation also has a $10.5 million offer on the table.

And Pennsylvania has a stake in the deal too, said Dennis Shaffer, vice president of marketing for the Nittany & Bald Eagle Railroad Company. In addition to its corporate headquarters, Conrail also has locomotive repair shops outside Altoona and railroad car shops in Holidaysburg, Shaffer said.

"This could have a big economic impact on the state," Shaffer said. "Both CSX and Norfolk Southern already have their own heavy repair shops. It could mean a lot of jobs."

Conrail spokesman Rudy Husband said it is unclear how the railroad -- formed by an act of congress from six bankrupt eastern railroads in 1976 -- will look when and if it is acquired. Either company will have to submit a detailed operating plan if a deal goes through that would lay out what changes would be made to every line, yard and shop in the system.

A rail shakeup would also change the way Nittany & Bald Eagle does business, he said. The short line, which serves freight customers in Centre County, interchanges with Conrail mainlines at Lock Haven and Tyrone. Any merger would bring another railroad into the picture.

"Norfolk Southern has said they will sell some lines to encourage competition," he said. "They have been a little more open, in my opinion."

Norfolk Southern spokesman Robert Fort said one of his company's selling points is insuring a competitive environment.

"We believe in competition," he said. "We are talking about welling lines, not just granting trackage rights. Our offer is best for both companies and the customers."

John Spychalski, a professor of business logistics, said a federal regulatory agency will have a final say over how any combined railroad would operate. The federal government might order any purchaser to sell lines or rent the right to run trains over some routes -- trackage rights -- to the "looser" railroad.

"This could have a big economic impact on the state . . ."

- Dennis Shaffer, vice president of marketing, Nittany & Bald Eagle Railroad Company

"Trackage rights are a different proposition," he said. "The railroad might, through dispatching practices, make it difficult for the tenant company to provide a good service."

Spychalski said Nittany & Bald Eagle and its customers could benefit if another company serves either end of its line.

"A short line is only as good as its connecting railroads," he said.

The Nittany & Bald Eagle does not handle freight on its entire journey, he said. It only serves as a link between local manufacturers and the Conrail mainline between Philadelphia and Pittsburgh in the south and the Harrisburg-Buffalo route in Lock Haven, he added.

If the other railroad is an owner or a tenant on either line, he said, it gives the Centre County railroad more options.

"That other company may be allowed to pick up cars or set them out for the Nittany & Bald Eagle. This would give them another option if service deteriorates on one line."