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The Children’s Investment Fund Management L.L.P. (TCI), which has been critical of CSX Corp.’s management and performance, increased its stake in the Class I last month.
On Dec. 19, TCI and 3G Capital Partners Ltd. announced they formed a group whose members will own 8.3 percent of CSX’s outstanding common shares and hold derivative securities equivalent to an additional 11.8 percent. TCI previously owned 4.1 percent of CSX shares.
The group plans to nominate five directors to CSX’s board at the Class I’s 2008 annual shareholders meeting to be held in spring to “add strong independent directors with a shareholder orientation, a broad range of railroad and other relevant experience, and a firm commitment to improving CSX’s operating performance and corporate governance,” TCI officials said in a prepared statement.
The nominees are TCI founder Christopher Hohn, 3G Capital Managing Director Alexandre Behring, Lamphere Capital Management Managing Director Gilbert Lamphere, London Underground Managing Director Timothy O’Toole and Northwest Airlines Co-Chairman Gary Wilson.
“CSX’s incumbent board has overseen a railroad that for many years has lagged its peers on many of the key metrics of operational and financial performance,” said Hohn. “Rather than engage in a constructive dialogue with one of its largest shareholders, the CSX board has consistently ignored our substantive concerns and failed to hold management accountable for continuing operational underperformance.”
In October, TCI sent letters to CSX’s board stating they should separate the chairman and chief executive officer roles; install new independent directors; amend CSX bylaws to allow shareholders to request special meetings; align management compensation with shareholders’ interests; present a detailed plan to improve operations with specific long-term operational and cost targets; justify the railroad’s 2007-2010 capital spending plan; and improve relations with labor, shippers and shareholders.
A month later, CSX board members sent a letter to TCI expressing support for Chairman and Chief Executive Officer Michael Ward and his management team, and approving their efforts to boost financial and operational performance.
In a Dec. 19 statement responding to TCI’s announcement, CSX officials said the railroad’s current directors are well qualified to further advance the company’s interests, and various financial, safety and operational improvements prove the Class I is well run.
“CSX has a strong board of directors with a broad range of experience,” they stated. “This group of directors has driven the company’s successes, including nearly tripling the stock price in the past three years, and provided shareholders a return better than the rest of the North American rail industry and 89 percent of all S&P companies.”