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Exhibit (a)(34)
MORGAN STANLEY
MORGAN STANLEY & CO.
INCORPORATED
1585 BROADWAY
NEW YORK, NEW YORK 10036
(212) 761-4000
March 7, 1997
Board of Directors
Conrail Inc.
2000 Market Street
Philadelphia, PA 19101-1422
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, and as of December 18, 1996 and as
further amended as of March 7, 1997 (collectively, the "Merger Agreement").
Pursuant to the Merger Agreement, on November 21, 1996, Acquisition Sub accepted
for payment pursuant to an offer to purchase 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 terms of the Merger Agreement provide, among other things,
that: (i) Acquisition Sub will offer to purchase (the "Offer") and, if certain
conditions are satisfied, accept for payment each outstanding Share at a price
of $115.00 per share net in cash (the "Offer Consideration"); and (ii) following
consummation of the Offer, upon the receipt of certain shareholder approvals (if
necessary) and satisfaction of other conditions thereto, pursuant to the Merger
(as defined in the Merger Agreement and the "Merger" together with the Offer,
the "Transaction"), 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 $115.00 per share net in cash (the "Merger
Consideration," and the Merger Consideration, together with the Offer
Consideration, the "Consideration").
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 judgment 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. 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 in effect on, and the information made available to us as of,
the date thereof. 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, Morgan Stanley & 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 any shareholders'
meeting held in connection with the Merger. As you know, on February 12, 1997,
Norfolk Southern Corporation commenced a tender offer (the "NSC Offer") for all
of the outstanding Shares at a price per Share of $115 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 pursuant to Section 4.2(b) thereof creates
significant legal uncertainty relating to the consummation of the NSC Offer.
Accordingly, at your request, in rendering our opinion, we did not address the
relative merits of the Transaction, including said Section 4.2(b), the NSC Offer
and any alternative potential transaction.
Based on the foregoing, we are of the opinion on the date thereof 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,
MORGAN STANLEY & CO., INCORPORATED
By: /s/ MAHMOUD A. MAMDANI
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Mahmoud A. Mamdani
Managing Director
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