CONRAIL’s 17700 km network serving the northeast of the USA will be split between rival bidders CSX and Norfolk Southern, following the collapse of merger talks with CSX. Conrail officials confirmed on March 3 that the planned $9·4bn friendly merger had been defeated by a $10·5bn hostile offer from NS. But as CSX owns a 39·9% stake in Conrail, it may be able to block a merger with NS.

Senior executives of the three companies reopened talks on March 4 in order to settle the terms of a compromise break-up. CSX will match the NS bid price of $115 per share, acquire the rest of Conrail, and then recoup its outlay by selling half the network on to NS for $4·2bn. The final deal will still be subject to approval by the shareholders of all three railways, and by the Surface Transportation Board which has already expressed a preference for a split solution to balance the size of the two resulting eastern Class I operators in the eastern USA.

Initial plans would give CSX the former New York Central ’water-level route’ between New York, Buffalo and Chicago, the Boston & Albany corridor, and a link from Philadelphia to New York. NS would take the Pennsylvania Railroad main line from Philadelphia to Chicago via Pittsburgh, the Erie Lackawanna ’Southern Tier’ from Jersey City to Buffalo, and the former Reading railroad serving the Pennsylvania coalfield.

On March 13 CN Vice-President Gerald Davies told New York’s Department of Transportation that the proposals would limit competitive access to New York state from the north and west. o