Bidding war for Conrail CSX vs. Norfolk Southern: Which deal will benefit the Port of Baltimore?

November 15, 1996

NOW THAT A bidding war has broken out over the Northeast's dominant freight-rail carrier, what matters most is finding ways to preserve competition.

Both CSX and Norfolk Southern want to buy Conrail, the 20-year-old freight line pieced together by the government from the shards of the Penn Central and other bankrupt Northeast railroads. Over time, a costly taxpayer basket case became a highly profitable rail line with a near-monopoly in the Northeast.

This has made Conrail a prize. CSX announced a friendly $8 billion cash-and-stock offer, since sweetened to $8.5 billion; Norfolk Southern's offer now is an all-cash $10 billion. The winner effectively controls the U.S. eastern rail network; the loser might rush to link up with one of the two major rails left in the west.

But for Maryland and the Port of Baltimore, the relevant questions are far more parochial. Which deal better serves the port's needs for lower rates, rail cooperation, faster delivery times and and a willingness to let competitors use its tracks? Which deal promises the most benefit for Maryland's growing commuter rail system? Which deal helps preserve more rail-related jobs in Cumberland and Hagerstown?

Officials in the Clinton administration are voicing concern about the "implosion of the railroad industry" and the demise of competition. A return to the bad old days of railroad monopolies is what they fear. Captive shippers could be at the mercy of a single rail line.

The winner of the CSX-Norfolk Southern struggle may be decided next week by the Pennsylvania courts (which have a tough anti-takeover statute that favors CSX) or next month by Conrail's stockholders (who probably would opt for the more lucrative Norfolk Southern offer). But Washington has the last say: The Surface Transportation Board must approve any deal, and Congress may intervene if the winner tries to hog track access.

What could tip the scales are concessions made along the way. The loser justifiably will ask for liberal use of coveted tracks in the Northeast, especially into the huge and lucrative New York City market. More equitable track access is essential to guard against monopolistic rate charges.

Maryland officials must move smartly to negotiate favorable deals from all sides. A little saber-rattling from the state's congressional delegation may be needed, too. No one wants to see a return to the robber baron days or the days of regulatory excess. Finding a middle ground that encourages competition after this giant merger ought to be the final objective.

Pub Date: 11/15/96

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