COURT DENIES FIRM'S CHALLENGE TO CONRAIL MERGER.

Byline: Associated Press 

Norfolk Southern Corp. lost a key battle Tuesday in its bid to block CSX Corp. from buying Conrail, the collection of once-failed freight railroads that has become the target of a fierce takeover brawl.

U.S. District Judge Donald VanArtsdalen denied an injunction request by Norfolk Southern to halt the purchase. The judge said Conrail's board had not acted in bad faith in signing the $8.5 billion merger agreement with CSX. Norfolk has offered $10 billion.

The case has attracted attention not only on Wall Street but among corporate takeover lawyers, who say it represents a major test of a company's ability to reject a higher takeover bid.

Conrail, based in Philadelphia, has argued that Pennsylvania law allows it to consider not only the interest of shareholders, but of employees, the communities it serves and other interests.

VanArtsdalen cited that law in denying Norfolk Southern's request for an injunction. ``It is hard for me to conceive any shareholder being misled by Conrail or CSX,'' he said.

Norfolk Southern, which said it already had filed an appeal with the 3rd U.S. Circuit Court of Appeals, made its bid for Conrail a week after the CSX deal was announced.