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New York (HedgeCo.Net) – CSX is finding themselves in the middle of another battle, this time with a shareholder who is suing the railroad company along with hedge funds TCI and 3G Capital Partners.
Shareholder Deborah Donoghue is seeking the recovery of “short swing” profits from sales conducted by the two hedge funds between August and September 2007. She is hoping to recover profits from the sale of shares by the funds, before they announced their plan to launch a proxy battle and shake up the Board of Directors.
Donoghue is claiming that TCI and 3G sold 2 million shares of CSX stock and within six months, bought a large amount of shares and derivatives equal to shares of CSX common stock at lower prices.
“Such profits are recoverable on behalf of CSX by plaintiff as a shareholder of CSX, the latter having failed or refused to act in its own right and for its own benefit,” stated the complaint.
Donoghue isn’t the only one who believes the hedge funds didn’t act in good faith. CSX has been in a battle with the two funds ever since they exerted their controlling stakes to take over four board seats on the Jacksonville, Florida based company after a drawn out proxy battle.
CSX had argued that the funds “secretly coordinated” their fight to gain the seats on the board while failing to disclose their full stake in the company. The judge eventually ruled with the hedge funds, allowing them to vote their shares at the company’s annual meeting in June.
Hedge funds are not required to report to the Securities and Exchange Commission, thus these “short-swing” profits were not publicized.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
New York (HedgeCo.Net) – Jacksonville-based CSX Corp’s profit fell 6.1 percent in the third quarter according to their regulatory filing yesterday, thanks to reduced freight in a sour U.S. economy. This is the first time in the last five quarters that the railroad company has seen a decrease in profit.
Net income for the third quarter totaled $382 million, down $25 million from a year ago while revenue rose 18 percent to almost $3 billion.
While per-share earnings rose from 91 to 94 cents, it is because the company had reduced the amount of outstanding stock.
CEO Michael Ward maintains a positive outlook, saying CSX has strong liquidity and plenty of access to credit.
“CSX delivered impressive financial results in a challenging economy,” Ward said in a statement. “Our resilient business portfolio and disciplined operations continue to generate substantial earnings growth for shareholders.”
The company recently made headlines for its drawn out proxy battle with hedge funds TCI and 3G Capital Partners. After reluctantly placing two representatives from the funds on the Board of Directors, an appellate court denied their attempt to withhold two more seats in September. CSX was forced to concede, giving the activist hedge funds four seats total on the Board.
Despite the loss in profit, CSX increased their operating income by 31 percent to $733 million by moderating fuel costs and a “focus on productivity and cost control.” They are predicting that full-year earnings will come out at the “low end” of the estimated $3.65 to $3.75 a share.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
New York (HedgeCo.Net) – CSX looks to be cutting some slack to the two rebel hedge funds that have been on a quest to restructure their board of directors.
The railroad company said that it will give two seats to members of the slate first proposed by TGI and 3G Capital Partners and elected during the proxy battle last month.
The seats will go to 3G Managing Director Alexandre Behing and Gilbert Lamphere, former head of Canadian National Railway Co.
However, the hedge funds are claiming they won another two seats on the board. CSX fails to recognize this victory, claiming the election was too close to call.
CSX is planning on reviewing the voting process as early as next week for both TCI head Christopher Hohn and Managing Director of the London Underground Timothy O’Toole. However, the process could take several months.
“We believe the certification process will confirm that shareholders have elected four of our nominees to the CSX board. This latest tactic should be seen for what it is—a cynical attempt to thwart the expressed will of CSX shareholders,” stated the hedge funds.
The much anticipated annual shareholder’s meeting was held at the company’s headquarters in Jacksonville, Florida on June 25th where the board of directors was set to be nominated. Reporters were disappointed when CSX head Michael Ward abruptly ended the meeting and told the public that results were not readily available.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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Miami Herald- CSX is resuming its annual meeting in Jacksonville, but it is uncertain what will be on the agenda.
When the board met in June in New Orleans, it halted the meeting so it could continue counting votes for a slate of directors pushed by hedges fund. CSX rescheduled the meeting for Friday.
CSX said last week that preliminary results of the vote showed four of the five directors pushed by hedge funds had been elected.
But Chairman Michael Ward said the new directors cannot be seated until a court proxy battle wraps up. The hedge funds say the railroad company is stalling.
