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Case Introduction
Conrail
CSX
1981
Privatized through IPO in 1987
Controlled 29.2% of the Eastern
trucking industry
freight market
CSX-Conrail Deal
Result into more than $8.5 billion of revenues and nearly
Offer Price
It is a two-tiered deal worth $8.3 billion at announcement.
Initial Offer
Front end cash
offer
Back end stock
swap
Final value of
offer
Price of
share
Proportion of
shares
92.5
40%
86.78
60%
89.07
Anti-takeover
Mechanisms
Conrail had a poison pill mechanism in place which
$
95.63
90,500,000
50%
$400
$200
10%
$
8,654,515,000
$16,290,000,00
0
$24,944,515,00
0
EV as a multiple of
Santa Fe Burlington
Kansas City Illinois
Santa Fe Union Pacific
Chicago Union Pacific
Southern Union Pacific
EPS
21.4
14.6
13.4
18.3
18.4
Book Value
4.5
1.7
2.8
5.5
3.7
Sales
2.6
3.6
1.8
2.4
1.7
EBITDA
13.1
9.9
9.2
8.5
12.2
Median
18.3
3.7
2.4
9.9
Final
Valuation
.
4*Sales+.4*P/E
+.2*BV multiple
$9710mn
Conrail Stats
EPS
4.91
EBITDA
477.3333
EV
Debt
1876
Cash
33
BV
2938
Sales
3694.667
DCF Valuation
Fundamental value of target : $ 8339.71 mn
Net Synergy PV taxable: $ 5981.66
Share price for the fundamental value : $ 70.32/share
Maximum share price with synergies included: $ 136.41/share
WACC calculated as 9.47% with Rate of Equity as 10.51%
Assumptions
Microsoft Excel
Worksheet