CSX Railroads Hedge Fund’s Criticism

Feb 18 2008 | 12:00am ET

U.S. railroad giant CSX Corp., under fire from a British activist hedge fund, is fighting back.

The Jacksonville, Fla.-based railroad company last week sent a letter to The Children’s Investment Fund, accusing it of “unwarranted and disingenuous” criticism of a bylaw change.

Earlier this month, CSX amended its rules, requiring written requests from shareholders representing 15% of the company’s shares before calling a special shareholders meeting. TCI, which has nominated five candidates for TCI’s board as part of a proxy fight, has said shareholders should be allowed to request such meetings throughout the year.

“TCI seeks to undermine the functioning of the CSX board in furtherance of TCI’s own purposes,” CSX wrote to the hedge fund. “TCI wants the ability to initiate a perpetual ‘recall’ contest through special meetings as a tool to pressure the board to implement TCI’s proposals, regardless of their merit.”

CSX said the change was designed “to avoid the disruption and diversion of resources associated with the potential for multiple director elections each year.”

It is “clear that TCI’s interest in good corporate governance, but in achieving effective control of the company notwithstanding its ownership of only 4% of the shares,” CSX said.

TCI has been agitating for improved corporate governance and financial performance at the railroad.

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