CSX Seeks Shareholder Input on Activist Investor's Requests
February 14 2017 - 7:12PM
Dow Jones News
By Maria Armental
CSX Corp. wants its shareholders to vote on an investor's
proposal to install a new chief executive and take five board
seats, changes that CSX said would effectively shift control of the
railroad company to Paul Hilal's Mantle Ridge LP.
Mr. Hilal, a former top official at Bill Ackman's Pershing
Square Capital Management LP who owns an undisclosed stake in the
railroad, last month joined forces with Hunter Harrison, a railroad
veteran most recently at the helm of Canadian Pacific Railway Ltd.,
to shake up management at CSX.
On Tuesday, CSX said it was calling the special shareholder
meeting on March 16 to allow shareholders to voice their opinion
given the market reaction since their overture came to light.
Under the terms of the latest proposal -- on which shareholders
are being asked to vote -- Mr. Harrison would take over as chief
executive at CSX and he, Mr. Hilal and three others to be mutually
agreed upon would be appointed to CSX's board.
In addition, four of CSX's current directors would retire over
the next three years.
CSX said Mr. Harrison's four-year compensation package would
exceed $300 million, including $84 million to cover Mr. Harrison's
obligation to reimburse Mantle Ridge for compensation and benefits
he lost by leaving CP early. CSX said it would also have to take on
a related tax indemnity that Mantle Ridge had given Mr.
Harrison.
Under their proposal, Mr. Harrison's base pay would be set at
$2.2 million and he would be guaranteed at least a $2.64 million
bonus this year, CSX said.
The proposed contract, CSX said, omits customary non-compete and
employee non-solicit language. Further, it calls for CSX to "assume
responsibility for non-compete and employee non-solicit obligations
owed by Mr. Harrison to Canadian Pacific, which could restrict
CSX's conduct, including the entry into potential mergers."
"The CSX Board believes such an employment arrangement for an
incoming CEO is exceptionally unusual if not unprecedented," CSX
said in a press release.
CSX said its board doesn't plan to take a formal stand.
The company's shares, up 24% over the past month, fell 2% to
$46.91 in after-hours trading Tuesday.
Write to Maria Armental at maria.armental@wsj.com
(END) Dow Jones Newswires
February 14, 2017 19:57 ET (00:57 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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