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7/23/2008



Rail News: Rail Industry Trends

TCI/3G: CSX is delaying board election process; CSX: Counting votes in contested elections takes time


CSX Corp. continues to go to "extraordinary lengths" to prevent four Children's Investment Fund Management L.L.P. (TCI)/3G Capital Partners Ltd. nominees from taking their seat on the Class I's board and the delays could continue into September, TCI and 3G officials said in a letter to CSX's board dated July 22.

Last week, CSX announced preliminary results from board elections held June 25, which showed TCI/3G nominees Alexandre Behring, Christopher Hohn, Gilbert Lamphere and Timothy O'Toole were among the 12 candidates who received the most votes. Behring is 3G's managing director; Hohn is TCI's founder; Lamphere is managing director of Lamphere Capital Management; and O'Toole is managing director of the London Underground.

"After ... five consecutive days of continuous review conducted by CSX's lawyers and proxy advisor, while there have been de minimis changes to the vote totals, the inspector's updated tallies have confirmed that the outcome of the election has not changed — CSX shareholders elected four of our nominees," TCI and 3G officials said in the letter. "Today is the sixth day of review, and we are told that CSX is still seeking to find up to 122,229 'lost votes' despite the fact that this number of votes would not change the outcome of the election."

TCI and 3G officials believe there are no legitimate challenges to the tally that would change the election's outcome.

"In case CSX does wish to question the tally, we are prepared to immediately begin a challenge period, which is the final step before the election results can be certified," they wrote. "But CSX has declined our offer to do this. The implication is that the certification of the vote and seating of our duly elected directors will not occur as scheduled this Friday, July 25, but rather is being delayed even further."

CSX might not seat some of the nominees until the Class I's litigation appeal process in an attempt to strip TCI and 3G of some of their voting rights has concluded, which likely won't occur before September, TCI and 3G officials said.

"We do not understand how CSX can justify not seating legitimately elected directors," they said. "The shareholders have the right to elect the directors, and the law mandates elected directors are seated upon certification. We urge CSX to refrain from taking further steps to delay the inevitable outcome of this election."

In a statement released yesterday, CSX officials countered TCI's and 3G's claims by stressing three points:
• Vote counts in contested elections always take time, and the time period for the review — which continues in good faith — isn't unusual.
• The uncertainty in the vote count is significant enough to matter to the ultimate composition of the board.
• The U.S. district court made it clear that if the law were more certain, it would prevent TCI/3G from voting 6.4 percent of their outstanding shares.

"CSX will proceed quickly and continue to keep open the lines of communication with respect to the status," CSX officials said.


Contact Progressive Railroading editorial staff.

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