Transportation Secretary Elizabeth Hanford Dole said yesterday that she has narrowed the list of possible buyers for Consolidated Rail Corp. (Conrail) to three: the Norfolk Southern Corp., the Alleghany Corp. and a venture headed by J. Willard (Bill) Marriott Jr.
Dole said she is referring the Norfolk Southern offer to the Justice Department "to review the competitive impact" of selling Conrail to another railroad that competes with it in some markets west of Pittsburgh. Further, she said, she will submit all three offers to the Treasury Department "to review tax or financial questions raised by any of the three."
Dole's announcement came after weeks of negotiations with six finalists from among 14 bidders for Conrail, the Northeast freight railroad that is 85 percent owned by the federal government. The three still in the running are no surprise and have been the ones spoken of most favorably by those representing Conrail's employes, whose own bid has fallen by the wayside.
Representatives of the employe groups could not be reached for comment. They own 15 percent of Conrail and have helped make it a financial success through wage deferrals and other givebacks. Labor's agreement is regarded as essential to the conclusion of any sale.
The reviews Dole is requesting by two other Cabinet-level agencies represent an additional step, which will lengthen the selection process. It now seems likely that Dole will not reach a final decision until after Congress has adjourned, probably on Oct. 5, and perhaps not until after the election. Some action by Congress will be required before the sale can be completed.
"There is no artificial deadline," Dole said, a reference to the fact that Rep. James J. Florio (D-N.J.), chairman of the House subcommittee that will have to review the sale, and others have claimed she was determined to conclude a deal before the election.
Theodore E. Somerville, vice president and general counsel of Alleghany, said that Dole's action yesterday "is a definitive response to those saying the process is hasty. It has been painstaking and cautious to the point of being downright glacial."
When Alleghany made its first offer in April, it said it needed a decision by Oct. 1 because its legal status will change to that of an investment company if cash it is holding from an earlier sale of Investor Diversified Services is not reinvested. That is a status Alleghany seeks to avoid.
Somerville said he is still concerned about that. He said Alleghany does not think it can seek an extension of its legal deadline from the Securities and Exchange Commission "until we have some solid facts to take with us. We were hoping to have one solid fact, designation as the winning bidder."
Spokesmen for Marriott and Norfolk Southern had no comment.
Dole said that all three had "significantly improved" their offers. A knowledgeable source said the improvements included an increase in price -- all three are now offering about $1.2 billion in cash, up from about $1 billion -- and have agreed to a number of five-year protections for Conrail users and employes.
Protections include ceilings on the dividends Conrail could pay its stockholders, minimum levels of annual reinvestment in physical plant, retention of the basic Conrail route system rather than a piecemeal sale or abandonment, and a pledge that the buyer would retain voting control of Conrail.
One of DOT's fears has been that it would be unable to keep track of Conrail's ownership if too much stock went public.