CSX fights hedge fund's plans
The Jacksonville railroad firm's boss testifies before Congress today.
Published March 5, 2008
WASHINGTON - The chief executive of CSX Corp. and a partner from the hedge fund seeking major changes in the Jacksonville railroad company's management structure will share a witness table today on Capitol Hill.
The Children's Investment Fund, which believes CSX is not performing as well as it should, wants to shake up the company's board, in part by making it easier for shareholders to propose the election of directors at special meetings.
But there are concerns in Congress that TCI's activism could eventually lead to a takeover attempt. That unnerves lawmakers because of the critical infrastructure involved and the fact that hedge funds are not regulated by the Securities and Exchange Commission. TCI, which has a 4 percent stake in CSX, denies any interest in taking operational control.
CSX chairman and CEO Michael Ward and Snehal Amin, a partner at TCI, are scheduled to testify before the House subcommittee on railroads, pipelines and hazardous materials.
CSX, which last year reported more than $10-billion in revenue and posted fourth-quarter earnings that easily beat Wall Street estimates, bristles at TCI's criticism. It argues that "special meetings" would simply allow TCI to pressure the board to implement its proposals.
But in a sign of how seriously it takes TCI's overtures, CSX spent a total of $3.2-million last year to lobby the federal government on many issues, including legislation that would require hedge fund advisers to register with securities regulators, according to a disclosure form posted online last month.
If the London-based fund were to gain a controlling interest in CSX, the Committee on Foreign Investment in the United States under the Treasury Department could intervene assuming national security is deemed to be threatened, according to House subcommittee documents.
"It could disrupt service to many of its shippers and impose an unacceptable impact to the U.S. economy," according to a memo prepared for today's House hearing.
TCI in October asked CSX's board to separate the roles of chairman and CEO, add new directors with railroad experience, present a plan to improve operations and more.