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Hedge funds to continue quest for board seats despite ruling

New York (HedgeCo.Net) – The proxy battle waged by two hedge funds against railroad operator CSX is far from over, despite a ruling against the funds last week.

TCI, who runs the Children’s Investment Fund of Britain, and 3G Capital Partners, continue in their quest to elect 5 nominees to the board of CSX, citing lack of railroad experience among the current 12 members.  The hedge funds have a combined 8.7% share in CSX.

A Manhattan court recently ruled that the two hedge funds had violated disclosure regulations, though there was nothing the judge could do to stop the funds from voting their shares at the company’s annual meeting on June 25, much to the dismay of CSX. 

The ruling also stated that, “any penalties for defendants’ violations must come by way of the Securities and Exchange Commission or the Department of Justice.”  CSX may appeal the decision.    

The hedge funds wish to gain seats on the board in order to gain a strategic vantage point from inside the company.  Funds may do this in an attempt to gain higher returns for shareholders.   

“Michael Ward, the Chairman and CEO of CSX, wondered why we haven’t just taken our profits and sold our shares, much as the board and management of CSX have done over the past two years. If we believed that CSX already had achieved its full operating potential, that’s exactly what we would do. However, in our view, CSX has only just begun to improve…” said the hedge funds in a recent letter to shareholders, prompting them to send in their proxy cards.

Alexandre Behring from 3G and Chris Hohn from TCI are two of nominees looking to gain seats.  The other three hopefuls are not affiliated with the funds, but have experience in the railroad industry, something that the fund’s believe is crucial to the value of the company.  

Julie Scuderi
Senior Editor for HedgeCo.Net
Email: julie@hedgeco.net

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