Washington An agreementin the merger would end one of the most expensive takeover fights in railroad history.
CSX Corp. and Norfolk Southern Corp. would split up Conrail and remain competitive rivals along the East Coast under an agreement being worked out to break a six-week stalemate.
Conrail's board of directors scheduled a meeting Monday to consider the merger, but the company made no immediate announcement.
Both CSX and Norfolk Southern would gain good freight routes to the important New York market under the tentative plan, which needs approval from Conrail's board. The details still would have to be worked out over the next month or two, a railroad industry source said Monday.
Under the plan, CSX would raise its offer to acquire Conrail, and Norfolk Southern then would buy about half of Conrail's routes, said the source, speaking on condition of anonymity.
An agreement would end one of the most expensive takeover fights in railroad history.
CSX initially offered $8.4 billion, or $92.13 per share, but most recently had offered $110 per share. The deal calls for CSX to pay about $10.5 billion, or $115 per share, matching Norfolk Southern's hostile bid.
Conrail's board had been pushing for CSX's lower-priced offer in order to keep the company intact; CSX had promised to keep the new company headquartered in Philadelphia. Conrail shareholders, however, refused on Jan. 17 to let CSX move ahead with its proposed takeover.
Pressure to work out a deal increased after the head of the railroad regulatory agency indicated she was prepared to impose a settlement if the companies could not reach one. Top executives from the three companies agreed to hold talks to break the stalemate.
``It was a very bad situation,'' said Charles Vincent, a financial analyst with PNC Asset Management Group in Philadelphia. ``Shareholders basically said we don't want a merger with CSX because the money wasn't there. At that point, Conrail lost control of its destiny. There wasn't much they could do.''
Officials with the rail companies declined comment.
``We've agreed among the three parties that we're not going to be discussing the so-called discussion,'' said Norfolk Southern spokesman Robert Fort.
The Washington Post first reported Sunday the three rail giants were nearing a deal, and The Wall Street Journal and The Philadelphia Inquirer reported additional details Monday.
Any agreement is subject to approval by federal regulators and Conrail shareholders. Vincent said a plan that preserves competition is likely to win a favorable audience with the Surface Transportation Board.
CSX and Norfolk Southern, both primarily Midwestern and Southeastern railroads, would gain good Conrail routes linking their north-south and east-west routes to the New York area, a market now dominated by Conrail.
For the rest of the Northeast, the industry source said, the railroads are planning to divide direct access to important markets evenly, and few markets would be served by both.
The news lifted the stocks of all three companies Monday on the New York Stock Exchange. Conrail was up $6.25 to $110.75, CSX rose $3.12 1/2 to $49.25 and Norfolk Southern gained $2.75 to $93.87 1/2.
Congress created the Philadelphia-based Conrail in 1976 out of six failed Northeastern railroads. Conrail operates an 11,000-mile rail freight network in 12 Northeastern and Midwestern states, the District of Columbia and Quebec.