Activist shareholder nominees to join CSX board

July 26 12:05:01 PM, Yahoo News

AP - Railroad giant CSX said it has asked two nominees of activist hedge fund shareholders TCI and 3G Capital to join its board, but said it will await a vote review and court action before seating its two remaining members.

Jacksonville, Fla.-based CSX Corp. said Friday that nominees Gilbert H. Lamphere and Alexandre Behring will join the board immediately.

Lamphere is managing director of private investment firm Lamphere Capital Management and a former director at Canadian National Railway Co.and Behring is 3G managing director.

"We look forward to welcoming our new board members and working together to continue delivering record performance for all our shareholders," said Michael Ward, CSX chairman.

Ward said the continuing legal fight over control of the board being waged by CSX against TCI and 3G was not hurting the company and pointed to a second-quarter earnings rise of 19 percent.

"That's not an issue," Ward said after the meeting.

The vote to elect two other hedge fund board candidates, TCI Founder Chris Hohn and Timothy T. O'Toole, managing director of the London Underground, remains too close to call.

Ward said the most recent preliminary draft report of an independent inspector of elections shows that the candidates competing for those seats have a difference in votes that is now less than one-fifth of 1 percent of the shares entitled to vote at the meeting and the status of a number of votes is still unclear.

Ward said the vote review process may be completed as early as next week.

Both of those seats are pending the company's court appeal with the 2nd U.S. Court of Appeals. The company expects the appeal to be resolved within two months.

In a statement released Friday, TCI and 3G took exception to CSX's refusal to seat all elected directors upon certification of the election results.

"We believe the certification process will confirm that shareholders have elected four of our nominees to the CSX Board. This latest tactic should be seen for what it is — a cynical attempt to thwart the expressed will of CSX shareholders," the statement said.

The two hedge funds said in June that they own 8.7 percent of CSX shares, and swap contracts boosted their economic exposure to an additional 12.3 percent of CSX stock. They have asked CSX to change its operations and put up a slate of five nominees.

While the company argues that its success is the product of a strong management team, some analysts suggest that the company's improving operations have more to do with the pressure imposed by its activist hedge fund shareholders.

The hedge funds — TCI, which manages The Children's Investment Master Fund, and 3G Capital — have asked CSX to present a plan to improve operations and replace current board members with little or no railroad experience.

Officials of the hedge funds did not speak at the meeting Friday, but Daniel Schwartz of 3G Capital questioned Ward after the meeting. Most of Ward's answers were a repeat of what he said at the meeting.

The board also seated a CSX nominee, John D. McPherson, who was president and chief operating officer of Florida East Coast Railroad from 1999 to 2007.

Three CSX board members resigned effective when the replacement board member is seated. They are Southwood J. Morcott, Robert D. Kunisch and Elizabeth E. Bailey.

The annual meeting was continued after a first meeting in New Orleans in June, to determine who won seats to the 12-member board. After a five-minute session, Ward adjourned the meeting until Sept. 24.

CSX shares closed fell 26 cents to close at $63.34.

CSX provides rail, intermodal and rail-to-truck services. The company's transportation network covers about 21,000 miles, with service to 23 eastern states and the District of Columbia. It connects to more than 70 ocean, river and lake ports.

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