CSX Seeks Shareholder Input on Activist Investor's Requests

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)

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