I have been reading about the controversy between TCI and CSX in Railway Age. I have to confess that I don’t really understand this. Basically TCI is a group of stockholders that is unhappy with the way CSX is managed. The CSX management team says they are doing the best job humanly possible. I know that is really simplified but that’s what it amounts to when you boil it all down. TCI wants three of there people placed on the CSX board of directors. The whole thing is sounds similar to what happens when boosters at a big college want the football coach fired for not winning enough games.
Can someone tell me if there is really anything to be concerned about here? Is one side “right”? If TCI wins, will it really “hurt the industry” as much as the CSX team says it will? If TCI is so extremely unhappy with the way CSX is being run, why don’t they just sell their CSX stock, go to Norfolk Southern and buy NS’ stock? It seems to me that trying to browbeat CSX into changing when they don’t want to is just a big waste of everybody’s time.
Frequently when a private-equity group gets a lot of money together and invests heavily in one stock, they are looking for fundamental changes in management. This doesn’t always require 51% of a vote. Sometimes it can be done by sheer leverage.
With what they’ve got and how they are operating, I don’t see CSX becoming more efficient or profitable by making corporate heads roll. Just IMHO but I think CSX stock was ridden up too much during the summer to make it at all attractive as an investment today. Again, IMO.
As I understand it, TCI wants more of the profits going into dividends than to such vanities as track maintanance, equipment upkeep, etc. This is what brought the rails to the low point we have recently seen. I might be wrong, and am sure I will be corrected as need be. Management decided that TCI’s plan was bad for the company and told them so. HTH
Good grief! IMO the CSX ought to be paying more money and attention to MOW issues. It would only mean less of such attention if even more money goes over to the shareholders. CSX seems to have a lot of minor-derailment mishaps lately, which may or may not betoken that they’re letting things slip, but certainly raises a caution.
One wonders why TCI is fooling with a railroad company; most of them are classed as “mature cyclicals” in the stock market which means they usually make a little money, but only rarely make a lot.
It would be a [censored]’ shame if CSX got looted. Especially considering all the time, care and bunches of money it took to get the northeastern lines back into shape during the Conrail era.
My take on the TCI initiative is that they want to loot all the cash from the CSX coffers that they can, in the shortest amount of time and have no intentions of leaving a financially vialble, operationally sound railroad in their wake.
The article reports that TCI, 3G Capital Partners and other individuals have form a group whose direct holdings are 8.3% of the outstanding shares and have various derivative securities providing “economic exposure” to the equivalent of another 11.8% of CSX shares. It is not clear to me that the group has any voting rights attached to the derivative securities.
The article names the 5 to be nominated to the board with brief bio’s on each. Three are railroad men said to have performed, IMO near miracles on the property where they worked. I do not know anything about the three other than what is reported.
The CSX Board has 12 directors, all “outside directors” except Mike Ward, CSX’s Chairman of the Board, President and Chief Executive Officer. Anyone interested will find the bio’s of the current directors on the proxy statement that was filed in March of this year prior to the annual meeting.
It will be interesting to see how this unfolds. There are potential ramifications beyond the direct effect that TCI’s proposed actions would have on the future of CSX. For example, one of their proposals is to increase frieght rates far in excess of current inflation rates. Would that generate greater support for new federal economic regulations of railroads?
I think most observers would agree that CSX is in the bottom tier of effective large railroad managers going back at least as far as the John Snow days. To the extent they want more effective Board supervision of management, they may very well be right.
However, to the extent this is simply an attempt to raid the CSX treasury, it is not in the longer term interests of the railroad nor their stockholders.
I just looked through those bios. Scary. One, maybe two I could support. The rest don’t have a clue (although Disney does run a couple of railroads…).
I also found it interesting that getting a return for the investors was the first reason listed for what they want to accomplish. Not that I’m against the investors getting a return, but you can only squeeze so much blood. I read their list like the ingredients on a package of food - the largest portion is listed first…
Mr. Timothy O’Toole is the only person that will bring anything useful to the Board. Ask the people at Northwest Airlines about Mr. Gary Wilson. Be sure to keep small children beyond shouting distance. Mr. Wilson’s management skills were not great enough to arrest the descent of NWA into bankruptcy, although he was no longer a member of the board when the bankruptcy filing took place. Mr. Wilson was smart enough to sell much of his stock before the date that employees were allowed to sell the stock they were issued in lieu of part of their paycheck.
What I thought was most interesting and bizzare about this whole thing was that the UTU supported TCI last spring when this first reared its ugly head. A way to dump on the '“evil RR management” and Ward I assume. They have been very quite about it since, even if it is here members jobs on the line.
Based on what I have read, TCI seems interested ONLY in enhancing their investor’s rate of return at the expense of CSX. What they are asking could well place CSX in eventual bankruptcy.
Yes, even major class I railroads can become the victims of corporate raiders, and that is what TCI appears to be. No thought of necessary services, just what will enhance their investors wallets.
Assuming that CSX did not invest in MOW or new power, in five years they would be trashed.