EXHIBIT (a)(9)
December 18, 1996
The Board of Directors
Conrail Inc.
2001 Market Street
Philadelphia, PA 19103
Dear Members of the Board:
You have requested our opinion as to the fairness, from a
financial point of view, to the holders of shares of Common Stock, par
value $1 per share ("Common Stock"), and of Series A ESOP Convertible
Preferred Stock (such Preferred Stock together with the Common Stock
is referred to as the "Shares") of Conrail Inc. (the "Company") of the
consideration to be received in a series of transactions
(collectively, the "Transactions") pursuant to the Agreement and Plan
of Merger among the Company, CSX Corporation ("CSX") and Green
Acquisition Corp. ("Tender Sub"), dated as of October 14, 1996, as
amended as of November 5, 1996 and as further amended as of December
18, 1996 (collectively the "Merger Agreement"). Pursuant to the Merger
Agreement, on November 21, 1996, Tender Sub accepted for payment
pursuant to an offer to purchase (the "First Offer") 19.9% of the
outstanding Shares at a price of $110.00 per share net in cash (the
"Offer Consideration"). The terms of the Merger Agreement provide,
among other things, that (i) if certain conditions are satisfied,
Tender Sub will accept for payment pursuant to an offer to purchase
(the "Second Offer" and together with the First Offer, the "Offer")
additional Shares such that the Shares purchased in the First Offer
and the Second Offer will total 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) subject
to, among other things, the favorable required vote of holders of
Shares, pursuant to the First Merger and the Second Merger (each as
defined in the Merger Agreement and collectively referred to herein as
the "Merger"), each remaining outstanding Share (other than Shares
owned by the Company as treasury stock or owned by CSX, Tender Sub or
any other subsidiary of CSX and other than Shares held by holders who
properly exercise and perfect dissenter's rights, if any) will be
converted into the right to receive (the "Merger Consideration") (x)
1.85619 shares of Common Stock of CSX, par value $1.00 per share ("CSX
Common Stock"), and (y) convertible
preferred stock of CSX (the "Additional Securities") having a value to
be determined in accordance with the terms of the Merger Agreement on
a fully distributed basis equal to $16 per Share; provided that if
less than the Designated Number of Shares is purchased pursuant to the
Offer, the Merger Consideration will be adjusted so that when taken
together with the Offer, 60 percent of the Fully Diluted Shares will
each have been converted into the right to receive the Merger
Consideration and 40 percent 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 Offer Consideration and the
Merger Consideration are collectively referred to herein as the
"Consideration."
In connection with the rendering of this opinion, we have:
(i) Reviewed the terms and conditions of the Merger
Agreement and the financial terms of the Transactions, all as set
forth in the Merger Agreement, and the option agreement between
Company and CSX pursuant to which CSX was granted the right to
purchase shares of Common Stock (the "Option Shares") and the
option agreement between CSX and the Company pursuant to which
the Company was granted the right to purchase shares of CSX
Common Stock, each dated October 14, 1996 (collectively, the
"Option Agreements");
(ii) Analyzed certain historical business and financial
information relating to the Company and CSX;
(iii) Reviewed certain financial forecasts and other data
provided to us by the Company and CSX relating to the businesses
of the Company and CSX, respectively, including the most recent
business plan for the Company prepared by the Company's senior
management, in the form furnished to us;
(iv) Conducted discussions with members of the senior
managements of the Company and CSX with respect to the businesses
and prospects of the Company and CSX, respectively, the strategic
objectives of each and possible benefits which might be realized
following the Merger;
(v) Reviewed public information with respect to certain
other companies in the lines of businesses we
believe to be generally comparable in whole or in part to the
businesses of the Company and CSX and reviewed the financial
terms of certain other business combinations involving companies
in lines of businesses we believe to be generally comparable in
whole or in part to the businesses of the Company and CSX that
have recently been effected;
(vi) Reviewed the historical stock prices and trading
volumes of Common Stock and CSX Common Stock; and
(vii) Conducted such other financial studies, analyses and
investigations as we deemed appropriate.
We have relied upon the accuracy and completeness of the
foregoing financial and other information and have not assumed any
responsibility for independent verification of such information or any
independent valuation or appraisal of any of the assets of the Company
or CSX nor have we been furnished with any such appraisals. With
respect to financial forecasts, we have assumed that they have been
reasonably prepared on bases reflecting the best currently available
estimates and judgments of managements of the Company and CSX as to
the future financial performance of the Company and CSX, respectively.
We assume no responsibility for and express no view as to such
forecasts or the assumptions on which they are based.
Our opinion is necessarily based on economic, monetary,
market and other conditions as in effect on, and the information made
available to us as of, the date hereof.
In rendering our opinion, we have assumed that (i) the
Transactions will be consummated substantially on the terms described
in the Merger Agreement, without any waiver of any material terms or
conditions by any party thereto, and that obtaining the necessary
regulatory approvals for the Transactions will not have an adverse
effect on CSX or the Company or on the trading value of CSX Common
Stock or the Additional Securities and (ii) the Merger will qualify as
a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended. We were not requested to, and did
not, solicit third party offers to acquire all or any part of the
Company.
We are acting as financial advisor to the Company's Board of
Directors in connection with the Transactions and will receive fees
for such services, a substantial portion of which fees are contingent
upon the consummation of the Transactions. Our Firm has in the past
provided and is currently providing investment banking and financial
advisory services to the Company and has received customary fees for
rendering such services. Our Firm has in the past also provided
investment banking and financial advisory services to CSX and has
received customary fees for rendering such services.
Our engagement and the opinion expressed herein are for the
benefit of the Company's Board of Directors and our opinion is
rendered in connection with its consideration of the Transactions.
This opinion is not intended to and does not constitute a
recommendation to any holder of Shares as to whether such holder
should tender Shares pursuant to the Offer or vote to approve the
Merger Agreement and the transactions contemplated thereby. It is
understood that, except for inclusion of this letter in its entirety
in a proxy statement or tender offer recommendation statement on
Schedule 14D-9 from the Company to holders of Shares relating to the
Transactions, this letter may not be disclosed or otherwise referred
to without our prior written consent, except as may otherwise be
required by law or by a court of competent jurisdiction.
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, which per
Share price was increased to $110 on November 8, 1996. 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. Counsel to
the Company has 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, including said Section 4.2(b), the NSC
Offer and any alternative potential transactions.
Based on and subject to the foregoing, we are of the opinion
that, as of the date hereof, the Consideration to be received by the
holders of Shares pursuant to the Offer and the Merger, when taken
together, is fair to such holders (other than CSX, Tender Sub or any
other subsidiary of CSX), from a financial point of view.
Very truly yours,
LAZARD FRERES & CO. LLC
By /s/ J. ROBERT LOVEJOY
-----------------------
J. Robert Lovejoy
Managing Director