Consolidated Rail Corporation

Common Stock

(per value $1.00 per share)

Price $28 Per Share

The shares are being sold by the United States Government pursuant to the Conrail Privatization Act. The Company will not receive any proceeds from the sale of the shares.

Upon request, a copy of the Prospectus describing these securities and the business of the Company may be obtained within any state from any Underwriter who may legally distribute it within such State. The securities are offered only by means of the Prospectus, and this announcement is neither an offer to sell nor a solicitation of any offer to buy.

52,000,000 Shares

This portion of the offering is being offered in the United States and Canada by the undersigned.

Goldman, Sachs & Co.

The First Boston Corporation

Merrill Lynch Capital Markets

Morgan Stanley & Co.

rcorpDo Salomon Brothers Inc.

Shearson Lehman Brothers Inc.

Alex, Brown & Sons Dillion, Read & Co. Inc. Donaldson, Lufkin & Jenrette Drexel Burnham Lambert Hambrecht & Quist E.F. Hutton & Company Inc. Kidder, Peabody & Co. Lazard Freres & Co. Montgomery Securities Prudential-Bache Capital Funding Robertson, Colman & Stephens

L.F. Rothschîfd, Unterberg, Towbin, Inc. Smith Barney, Harris Upham & Co. Wertheim Schroder & Co. Dean Witter Reynolds Inc.

William Blair & Company J.C. Bradford & Co. Dain Bosworth A.G. Edwards & Sons, Inc. McDonald & Co. Oppenheimer & Co., Inc.

Piper, Jaffray & Hopwood ^"Prescott, Ball & TurbenTtnc. Thomson McKinnon Securities Inc.3^"^ Wheat, First Securities, Inc.

Advest, Inc. American Securities Corporation Arnhold and S. Bleichroeder, Inc. Robert W. Baird & Co. Bateman Eichier, Hill Richards

Sanford C. Bernstein & Co., Inc. Blunt Ellis & Loewi Boettcher & Company, Inc. Burns Fry and Timminsinc. Butcher & Singer Inc. Cowen & Company Dominion Securities Corporation EbeFstacdt1 Fleming Inc. Eppler, Guerin & Tuner, Inc. First of Michigan Corporation First Southwest Company Furman Seiz Mager Dietz & Birney Gruntal & Co., Incorporated Howard, Well, Labouisse, Friedrichs Interstate Securities Corporation

Janney Montgomery Scott Inc. Johnson, Lane, Space, Smith & Co., Inc. Jonston, Lemon ¿TCa Josephthal & Co. Ladenburg, Thalman & Co. Cyrus J. Lawrence Legg Mason Wood Walker Morgan Keegan & Company, Inc. Moseley Securities Corporation Needham & Company, Inc. Neuberge" & Berman The Ohio Company Rauscher Pierce Refsnes, Inc. The Robinson-Humphrey Company, Inc. Rothschild Inc. Stephens Inc. Stifel, Nicolaus & Company Sutro & Co. Tucker, Anthony & R. L. Day, Inc. Underwood, Neuhaus & Co. Wood Gundy Corp.

This special bracket of minority-owned and controlled firms assisted the Co-Lead Managers in the United States Offering pursuant to the Conrail Privatization Act.

AIBC Investment Services Corporation WR Lazard Securities Corporations

Daniels & Bell, Inc. Pryon, Govan, Counts & Co. Inc.

Doley Securities, Inc. Muriel Siebert & Co., Inc.

6,750,000 Shares

This Portion of the offering is being offered outside the United States and Canada by the undersigned. Goldman Sachs International Corp.

First Boston International Limited

Merrill Lynch Capital Markets

Morgan Stanley International

Salomon Brothers International Limited

Shearson Lehman Brothers International Algemene Bank Nederland N.V. Banque Bruxelles Lambert S.A. Banque Nationale de Paris Cazenove & Co. The Nikko Securities Co., (Europe) Ltd. Nomura international N. M. Rothschild & Sons J. Henry Schroder Wagg & Co. Soclete Generate S. G. Warburg Securities

ABC International Ltd. Crédit Lyonnais Morgan Grenfell & Co. J. VontobeÎ& Co. Ltd

March 27, 1987

Banque Paribas Capital Markets Limited Caisse Nationale de Credit Agricole Campagnie de Banque et dinvestissements, CBI Daiwa Europe IMI Capital Markets (UK) Ltd. Joh. Berenberg, Gossler & Co. Leu Securities Limited

Peterbroeck, van Campenhout & Cie SCS Swiss Volksbank Vereins- _ und Westbank

M.M. Warburg-Brinckmann, Wirtz & Co. Westdeutsche Landesbank Yamaichi International (Europe)

Ross-Westerfield-Jaffe: I V. Long-Term Financing I 19. Issuing Securities to I I © The McGraw-Hill

Corporate Finance, Sixth the Public Companies, 2002

Edition

Chapter 19 Issuing Securities to the Public 537

■ TABLE 19.2 The Methods of Issuing New Securities

Method

Type

Definition

Public

Traditional

Firm-commitment

Company negotiates an agreement with an investment banker to

negotiated

cash offer

underwrite and distribute the new stocks or bonds. A specified

cash offer

number of shares is bought by underwriters and sold at a higher price.

Best-efforts cash offer

Company has investment bankers sell as many of the new shares as possible at the agreed-upon price. There is no guarantee concerning how much cash will be raised.

Privileged

Direct rights offer

Company offers new stock directly to its existing shareholders.

subscription

Standby rights offer

Like the direct rights offer, this contains a privileged subscription arrangement with existing shareholders. The net proceeds are guaranteed by the underwriters.

Nontraditional

Shelf cash offer

Qualifying companies can authorize all shares they expect to sell over a

cash offer

two-year period and sell them when needed.

Competitive firm cash offer

Company can elect to award underwriting contract through a public auction instead of negotiation.

Private

Direct placement

Securities are sold directly to purchaser, who cannot resell securities for at least two years.

The first public equity issue that is made by a company is referred to as an initial public offering (IPO) or an unseasoned new issue. All initial public offerings are cash offers because, if the firm's existing shareholders wanted to buy the shares, the firm would not need to sell them publicly. More than $5 billion was raised in 116 IPOs in 1994. A seasoned new issue refers to a new issue where the company's securities have been previously issued. A seasoned new issue of common stock may be made by using a cash offer or a rights offer.

These methods of issuing new securities are shown in Table 19.2 and discussed in the next few sections.

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