CSX Wants to Have a Special Meeting to Vote on the Fund’s Proposal of Activists

CSX Wants to Have a Special Meeting to Vote on the Fund’s Proposal of Activists

CSX, the railroad giant this Tuesday said that they were going to call a special meeting with its shareholders to seek some guidance from the investors on the topic of supporting proposals issued by activist investors seeking a replacement to company’s CEO and also obtain 6 seats of directors on the fourteen-person board that was just formulated.

Mantle Ridge LP, the activist investor, a Paul Hilal-led new activist fund, had recently launched the campaign, which will be seeking to install the veteran executive at the railroad Hunter Harrison to be the new Chief Executive Officer at CSX. Harrison had the position of Chief Executive Officer (CEO) at Canadian Pacific Railway (CP). He recently stepped down to join Mantle Ridge.

The two sides at CSX have been negotiating on this and the key dispute that appears is whether to involve compensation of Harrison and the amount of seats on the board that would be received by Mantle Ridge.

Paul Hilal wants to designate about six of the fourteen directors on the reconstituted board of fourteen people. He wants one seat for Harrison and one for himself. The activists also want three of the currently incumbent directors to step down in 2017 annual meeting and another one to resign in 2018.

A statement from CSX revealed that the proposal from Mantle Ridge hasn’t seen approval from the railroad and they had made another offer, which involved making Harrison as CEO and replacing the current CEO, Michael Ward. CSX also offered to add Hilal, Harrison and three mutually agreed others to be directors on the board while four of the incumbent nominees resign in the coming three years.

Although there is no date set for this meeting, the shareholders since March 2016 are allowed to vote in this meeting.

There is a strong possibility that Mantle Ridge pulls the trigger on a proxy contest (change of control) in the event of shareholders backing them in their plan in the special meeting and the company doesn’t decide to give in to what they are demanding. Hilal had engineered the insurgency in the year 2012 at CP, which installed CEO as Harrison that led to a turnaround that made the CP’s Toronto-based shares to have a climb of 190% during his tenure. 

If the next CEO of CSX is Harrison, then there might be a lot of stock buybacks operational changes and a merger might be attempted, which would change the railway industry as we know it.

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