1
(a)(15)
[XXXXXX XXXXXXX LETTERHEAD]
November 5, 1996
Board of Directors
Conrail Inc.
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000.
Gentlemen and Mesdames:
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
as amended as of November 5, 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 $110.00 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" and
together with the Offer, the "Transactions") 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 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.
2
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;
(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
3
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.
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.
As you know, on October 24, 1996, Norfolk Southern Corporation commenced a
tender offer (the "NSC Offer") for all of the outstanding Shares at a price per
Share of $100 net in cash. Counsel to the Company has advised the Company's
Board of Directors that the fact that the NSC Offer is subject to, among other
conditions, the termination of the Merger Agreement and that the Company is
currently contractually prohibited from terminating the Merger Agreement creates
significant legal uncertainty relating to the consummation of the NSC Offer.
Counsel to the Company has further advised the Company's Board of Directors
that, under Pennsylvania law, in considering a proposed business combination,
the Company's Board of Directors is empowered to take into account the long-term
interests of the Company and all of its constituencies, not solely the highest
price for the Company's Shares. Accordingly, at your request, in rendering our
opinion, we did not address the relative merits of the Transactions, the NSC
Offer and any alternative potential transactions.
4
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
--------------------------------------
Xxxxxxx X. Xxxxxxx
Managing Director
