Saturday, 27 August 2016
Last updated 3 hours ago
Jul 24 2008 | 8:31am ET
The battle between U.S. railroad CSX Corp. and a pair of activist hedge funds continues, despite an apparent proxy victory by the latter.
The hedge funds, The Children’s Investment Fund and 3G Capital Partners, launched their latest verbal salvo in a battle characterized by fighting words, demanding that CSX seat the four hedge fund-nominated director candidates who won election to its board last month. But the railway insists the results have not been finalized, although an independent inspector has confirmed the results in a preliminary report.
CSX says it is still recounting the votes, and that there are more than 122,000 lost votes (out of several hundred million) still to be accounted for. But the company is also appealing a court decision refusing to strip TCI and 3G of their voting rights as punishment for securities law violations. Hearings on the matter are set for Aug. 25.
“We do not understand how repeatedly seeking judicial ‘sterilization’ of our shares is in the bext interest of shareholders,” the hedge funds wrote in a Tuesday open letter to CSX. “Further, we do not understand how CSX can justify not seating legitimately-elected directors on this basis.”
The hedge funds also threatened to sue the railroad if the directors are not seated, adding to the already existing mountain of litigation generated by the battle.
CSX replied that it is proceeding in good faith, and that vote counts always take time. “The time period for this review is not unusual,” it said.
Nor did the railroad apologize for the continued legal battle.
“The U.S. District Court did not flatly refuse to sterilize the votes,” it said. “The U.S. District Court made clear that if the law were more certain, it would prevent the TCI Group's voting of 6.4 percent of the outstanding shares of CSX.”
The hedge funds are not the only ones expressing impatience with CSX. RiskMetrics, the influential proxy advisory service that backed four of the hedge funds’ nominees, blasted the railroad for “a poorly conceived ‘scorched earth’ defense strategy.”
CSX has previously accused RiskMetrics of “uninformed judgment.”