TCI Wins, Loses In Busy Day

Jun 26 2008 | 7:43am ET

For The Children’s Investment Fund, it was the thrill of victory and the agony of defeat, all within a few hours.

After a contentious four-hour annual meeting at a New Orleans rail yard yesterday, the London-based activist hedge fund claimed victory in its battle with U.S. railroad giant CSX Corp. On the other side of the world, TCI suffered a crushing defeat, as shareholders of Japan’s largest electric utility voted down each of its proxy proposals.

TCI said that four of its five nominees to the CSX board had defeated management-backed candidates. A founding partner of TCI, Snehal Amin, called the result “a victory for all shareholders.”

Prior to claiming victory in four of the races, Amin said TCI has won at least two seats, with Gilbert Lamphere, a former chairman of the Illinois Central Railroad, and Alexandre Behring of TCI partner 3G Capital Partners, winning election to the board.

Amin added that TCI and 3G “don’t want to change the management.”

Still, CSX is not yet ready to concede defeat: The railroad said that the tally is too close to call, and might not be certified for a month. It will reconvene in a month at its Jacksonville, Fla., headquarters to certify the results.

Nor was the meeting without its confrontations: Amin several times called on the company to collect outstanding ballots and close the polls. Michael Ward, CSX’s chairman and CEO, insisted on keeping the polls open to “enfranchise” all shareholders.

There was no doubting TCI’s defeat in Japan, however. It was total.

Electric Power Development Co., better known as J-Power, said that its shareholders at its annual meeting in Tokyo had rejected all five of the hedge fund’s proposals, which included a call to double its dividend and limit its controversial cross-shareholdings.

“Despite being defeated, we’re proud to have done our best,” John Ho, who heads TCI’s Hong Kong office, said. He also fired a parting shot, calling the results “distorted” due to the cross-shareholdings, in which companies with which J-Power has a relationship buy stakes in the company, and J-Power does likewise. But J-Power rejected that argument.

“I don’t believe that it turned out to be a shameful outcome for our shareholders,” Yoshihiko Nakagaki, J-Power’s president, said. “We did not invest in other companies simply to win votes.”

Still, some shareholders voted with their feet after the result was announced, as J-Power shares fell by as much as 7% in its wake.

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