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EXHIBIT (a)(7)
[Letterhead of Xxxxxx Xxxxxxx & Co. Incorporated]
October 14, 1996
Board of Directors
Conrail Inc.
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000.
Gentlemen and Madam:
We understand that Conrail Inc. (the "Company"), CSX Corporation ("CSX") and
Green Acquisition Corp., a wholly owned subsidiary of CSX ("Acquisition Sub"),
have entered into an Agreement and Plan of Merger, dated as of October 14, 1996
(the "Merger Agreement"), which provides, among other things, for (i) the
commencement by Acquisition Sub of a tender offer (the "Offer") for 19.9% of
the issued and outstanding shares of common stock, par value $1 per share (the
"Company Common Stock"), and Series A ESOP Convertible Junior Preferred Stock
(together with the Company Common Stock, the "Shares") of the Company, for
$92.50 per share net to the seller in cash (the "Offer Consideration"),
provided that if certain conditions are satisfied, the Offer would be increased
to up to a number of Shares (the "Designated Number") equal to 40% of the fully
diluted Shares, excluding the Option Shares referred to below (the "Fully
Diluted Shares") and (ii) upon the receipt of certain shareholder and
regulatory approvals, the subsequent merger (the "Merger") of the Company with
and into Acquisition Sub. Pursuant to the Merger, the Company will become a
wholly owned subsidiary of CSX and each outstanding share of the Company Common
Stock, other than shares held in treasury or held by CSX or its subsidiaries,
will be converted into the right to receive 1.85619 shares of common stock, par
value $1.00 per share (the "CSX Common Stock") of CSX (the "Stock
Consideration" and together with the Offer Consideration, the "Consideration"),
provided that if less than the Designated Number of Shares are purchased
pursuant to the Offer, the Merger Consideration will be adjusted so that when
taken together with the Offer, 60% of the Fully Diluted Shares will each have
been converted into the right to receive the Stock Consideration and 40% of the
Fully Diluted Shares will have received or been converted into the right to
receive an amount of cash equal to the Offer
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Consideration. The terms and conditions of the Offer and the Merger are more
fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the Consideration to be received
by the holders of Shares pursuant to the Offer and the Merger, taken together,
is fair from a financial point of view to such holders.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements
and other information of the Company and CSX,
respectively;
(ii) reviewed certain internal financial statements and other
financial and operating data concerning the Company and
CSX prepared by the managements of the Company and CSX,
respectively;
(iii) reviewed certain financial projections for CSX prepared
by the management of CSX;
(iv) reviewed certain financial projections, including
estimates of certain potential benefits of the proposed
business combination, prepared by the management of the
Company;
(v) discussed, on a limited basis, the past and current
operations and financial condition and the prospects of
the Company and CSX with senior executives of the Company
and CSX, respectively;
(vi) reviewed the reported prices and trading activity for the
Company Common Stock and the CSX Common Stock;
(vii) compared the financial performance of the Company and CSX
and the prices and trading activity of the Company Common
Stock and the CSX Common Stock with that of certain other
comparable publicly-traded companies and their
securities;
(viii) reviewed the financial terms, to the extent publicly
available, of certain comparable acquisition
transactions;
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(ix) participated in discussions among representatives of the
Company, CSX and their financial and legal advisors;
(x) reviewed the Merger Agreement and certain related
documents; and
(xi) performed such other analyses and considered such other
factors as we have deemed appropriate.
We have assumed and relied upon without independent verification the accuracy
and completeness of the information reviewed by us for the purposes of this
opinion. With respect to the financial projections, including estimates of
certain potential benefits of the proposed business combination, we have
assumed that they have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the future financial performance
of the Company and CSX, respectively. We have not made any independent
valuation or appraisal of the assets or liabilities of the Company or CSX, nor
have we been furnished with any such appraisals. In arriving at our opinion,
we have assumed (i) that the Merger will qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended and
(ii) that obtaining all the necessary regulatory and governmental approvals for
the Merger will not have an adverse effect on the Company, CSX or on the
trading value of the CSX Common Stock. We have assumed that the Offer and the
Merger will be consummated substantially in accordance with the terms set forth
in the Merger Agreement, without any waiver of any material terms or conditions
by any party thereto. Our opinion is necessarily based on economic, market and
other conditions as in effect on, and the information made available to us as
of, the date hereof. In arriving at our opinion, we were not authorized to
solicit, and did not solicit, interest from any party with respect to the
acquisition of the Company or any of its assets.
We have been engaged to provide this opinion to the Board of Directors of the
Company in connection with this transaction and will receive a fee for our
services. In the past, Xxxxxx Xxxxxxx & Co. Incorporated and its affiliates
have provided financial advisory and financing services for the Company and CSX
and have received fees for the rendering of these services.
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It is understood that this letter is for the information of the Board of
Directors of the Company and may not be used for any other purpose without our
prior written consent, except that this opinion may be included in its entirety
in any filing made by the Company with the Securities and Exchange Commission
with respect to the Offer and the Merger. In addition, we express no opinion
and make no recommendation as to whether the holders of the Company Common
Stock should tender such shares pursuant to the Offer or vote at the
stockholders' meeting held in connection with the Merger.
Based on the foregoing, we are of the opinion on the date hereof that the
Consideration to be received by the holders of Shares pursuant to the Offer and
the Merger, taken together, is fair from a financial point of view to such
holders (other than CSX, Acquisition Sub or any other subsidiary of CSX).
Very truly yours,
XXXXXX XXXXXXX & CO. INCORPORATED
By: /s/ Xxxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxx
Managing Director
