TCI Fund Management LLP and 3G Capital Partners Ltd. have accused CSX Corp. of delaying the inevitable outcome of an election that may have placed four of their nominees on the board of the third-largest U.S. railroad, reports Andrea Greiling Keane of Bloomberg News.
The hedge funds will take all necessary actions to protect shareholder interests if the duly elected board is not immediately seated, TCI Managing Partner Christopher Hohn and 3G Managing Director Alex Behring said in a letter to the carrier's board July 22.
The letter expands a showdown that began more than a year ago with TCI asking CSX to change its corporate governance and improve operations. TCI and 3G are the third- and fourth-largest shareholders, respectively, at Jacksonville, Florida-based CSX.
Behring and Hohn won seats on CSX's 12-member board, based on preliminary results released July 16 by the railroad and the funds. London-based TCI and 3G claimed victory at the June 25 annual meeting for four of their five nominees.
The length of the proxy-vote review is not unusual, according to a statement from CSX spokesman Andrew Siegel, who works for Joele Frank, Wilkinson Brimmer Katcher.
The value of the process has been proved in the fact that the process has already identified errors in the preliminary report, which have been confirmed by the independent inspector of election, CSX said in the statement. The review continues in good faith.
A U.S. district judge ruled last month that TCI and 3G could vote all their holdings in the board election even as he concluded that the hedge funds should have made earlier disclosures about equity swap agreements. CSX is appealing the part of the ruling allowing the investors to vote their stakes, while TCI and 3G are appealing his conclusion about the swaps.
TCI owns 4.4 percent of CSX's shares, while 3G has 4.2 percent.
Hohn and Behring said the review was a delay preventing them and the funds' other winning nominees, Gilbert Lamphere and Timothy O'Toole, from joining the board.
We are deeply dismayed that the company continues to go to extraordinary lengths to thwart the clear choice made by CSX shareholders, they wrote.
Advisers for TCI and New York-based 3G have reviewed all annual meeting votes, while CSX is still scrutinizing them.
There's a great deal of uncertainty in the votes that needs to be reviewed,'' CSX spokesman Garrick Francis said in an interview. There's sufficient uncertainty here that it matters.
Lawyers and proxy solicitors from both sides are reviewing the votes in Wilmington, Del., where IVS Associates, the meeting's voting inspector, is based. The results of the board balloting may still not be certified by July 25, when CSX is set to reconvene its annual meeting, Francis said.
(The preceding article was published July 23, 2008, by Bloomberg News.)
(The Associated Press circulated the following on July 24.)
JACKSONVILLE, Fla. CSX is resuming its annual meeting in Jacksonville, but it is uncertain what will be on the agenda.
When the board met in June in New Orleans, it halted the meeting so it could continue counting votes for a slate of directors pushed by hedges fund. CSX rescheduled the meeting for Friday.
CSX said last week that preliminary results of the vote showed four of the five directors pushed by hedge funds had been elected.
But Chairman Michael Ward said the new directors cannot be seated until a court proxy battle wraps up. The hedge funds say the railroad company is stalling.
