Norfolk Southern Corp. yesterday raised its offer to purchase the federal government's 85 percent share of Conrail from $1.2 billion to $1.9 billion, as Transportation Secretary Elizabeth Hanford Dole had requested.
Norfolk Southern Chairman Robert B. Claytor announced the decision after he met with Dole, who called Norfolk Southern "the best guarantor of Conrail's financial strength and service" and said that, by deciding to meet the higher purchase price, "Norfolk Southern has again demonstrated that it will also provide the maximum return to the government."
Dole asked Claytor to raise the price after Rep. John D. Dingell (D-Mich.), chairman of the House Energy and Commerce Committee, came out against the sale of Conrail to Norfolk Southern.
Asked what he would do to counter Dingell's opposition, Claytor said, "I would suggest Mrs. Dole is in a better position to answer that." He said that Norfolk Southern is "pleased to go the extra mile" but that "I am not a strategist."
Asked why he thought there was any hope that Dingell might change his opposition to the Norfolk Southern purchase, Claytor said: "I am not a professional politician. All I know is that, in Washington, things sometimes change."
Dingell did not appear to be changing yesterday. "As far as I'm concerned, the notion of selling Conrail to Norfolk Southern is dead," Dingell said.
He called the new price "puzzling" and said, "Price is not the issue. The competitive problems associated with a Norfolk Southern purchase are so immense and irremedial that I simply cannot support this merger."
Norfolk Southern's increased offer was expected: on Thursday at his corporation's annual meeting, Claytor said Norfolk Southern would continue to seek Conrail.
He told reporters yesterday that his directors authorized the higher purchase price and gave him authority to extend the memorandum of intent to purchase Conrail through Dec. 31. It currently expires July 1.
In a letter he hand-delivered to Dole, Claytor cited "improved economic conditions" as the basis for increasing the price.
He told reporters the primary element was the decline of interest rates.
The original $1.2 billion price was negotiated with Dole in February 1985.
Claytor told reporters: "I felt we could do this, but that our original offer was reasonable."
The $700 million increase offered by Norfolk Southern consists of $200 million in cash, $140 million in "excess" cash in Conrail's treasury and $360 million that Conrail says is the amount its employes' pension plan is overfunded.