Activist Investor Behind CSX Overhaul Sells Most of Its Stake
October 21 2019 - 5:17PM
Dow Jones News
By Paul Ziobro and Corrie Driebusch
The activist that shook up CSX Corp. has wound down most of its
investment in the railroad operator, marking an end to a three-year
saga that helped spur a massive overhaul of the U.S. railroad
industry.
Paul Hilal's investment vehicle, Mantle Ridge LP, has sold off
nearly all of its $1 billion position in CSX, according to
securities filings. About 4.7 million shares were bought back by
the railroad.
Mr. Hilal retains ownership of about 3.4 million shares of CSX,
according to a regulatory filing, and he will continue to serve as
a director and vice chairman of the company's board.
Shares of CSX have roughly doubled since January 2017 when The
Wall Street Journal reported that Mantle Ridge would mount a
campaign to shake up transform the railroad company.
A CSX spokesman declined to comment on the stock sale.
Mr. Hilal launched a brief boardroom battle to install railroad
veteran Hunter Harrison as the CSX's CEO. Mr. Harrison had
previously turned around operations at two large Canadian
railroads, including once with the backing of William Ackman's
Pershing Square Capital Management, where Mr. Hilal previously
worked.
Though Mr. Harrison was 72 years old, had battled health
problems and was nearing retirement at Canadian Pacific Railway
Co., CSX agreed to pay about $84 million to bring him on board as
CEO.
The plan was for Mr. Harrison to implement his so-called
precision scheduled railroading strategy, which focuses on running
fewer, longer trains on tighter schedules and removing unnecessary
steps like sorting railcars. Mr. Harrison immediately went to work
by closing facilities, idling hundreds of locomotives and laying
off thousands of employees.
The changes were disruptive at CSX and across the broader U.S.
freight-railroad network, causing widespread congestion and
shipping problems. Federal regulators summoned Mr. Harrison to
Washington for hearings.
Mr. Harrison, who often used an oxygen tank as he battled
unspecified health problems, died suddenly just nine months into
the turnaround.
Eventually, the gridlock cleared and CSX began operating a
leaner railroad more nimbly. Profit rose and the railroad's
operating ratio, which shows how much revenue is consumed by
operating expenses, where a lower figure is better, fell
dramatically.
Last week, CSX posted a 4% increase in quarterly profit, even as
revenue fell 5%, as cost cuts helped prop up income. The operating
ratio came in at 56.8%, a new low for the railroad.
The financial success has prompted other railroads, including
Kansas City Southern, Norfolk Southern Corp. and Union Pacific
Corp., to enact similar turnaround strategies modeled after Mr.
Harrison's work.
Write to Paul Ziobro at Paul.Ziobro@wsj.com and Corrie Driebusch
at corrie.driebusch@wsj.com
(END) Dow Jones Newswires
October 21, 2019 17:02 ET (21:02 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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