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CSX to Give Results of Dissident Director Vote in July

Reuters
Wednesday, 25 Jun 2008 | 5:31 PM ET

U.S. railroad CSXsaid results of a Wednesday shareholder vote on a slate of five dissident directors will be announced in July as two activist funds claimed they won at least two seats and cried foul over how the company conducted the balloting.

CSX Railroad
Oscar Sosa
CSX Railroad

"We believe that we have won at least two seats," Snehal Amin, a founding partner at The Children's Investment Fund (TCI), told reporters. TCI and another hedge fund, 3G Capital Partners, fielded a dissident slate for CSX's 12-member board. "This is a victory for all shareholders."

After abruptly ending the annual shareholder's meeting, CSX Chief Executive Michael Ward told reporters there was "no way to know" whether TCI and 3G won any seats until the results of the vote were verified.

In a statement the company said the vote was "too close to call." London-based TCI and 3G have fought a bitter six-month proxy battle with the railroad over seats on the board.

Amin said he was told by a third-party observer firm monitoring the vote that at one point four members of the dissident slate had won seats.

Amin claimed CSX kept voting open for several hours in order to coerce some shareholders to change their vote. The meeting lasted five hours.

"Our proxy advisors are trying to figure out with large financial institutions whether they changed their votes," Amin said. "Hopefully not enough (shareholders) changed their minds to affect the outcome."

CSX officials said the result of the vote, taken at a large tent in a railyard in New Orleans, would be released at 10 a.m. New York time on July 25 at the company's Jacksonville, Fla., headquarters.

TCI and 3G contend the company would do better with its nominees, by bringing more railroad experience to the board. Together the two funds have a 20 percent voting stake in CSX.

"We believe CSX can and should be the best railroad in America," Amin told the meeting. "(The nominees) have real railroad experience, they know the right questions to ask and have the economic incentives to do so."

The company argues the hedge funds' approach would saddle it with debt.

"CSX has a disciplined management that favors building lasting shareholder value," Ward told the crowd of about 80 shareholders, employees and journalists. "The board sets aggressive goals and holds management accountable for achieving them."

'Bloody Foreigners Divvying It Up'

While campaigns by activist shareholders to influence management have become more common in recent years, the CSX battle stands out because activist investors are targeting a company that is doing well.

CSX shares are up about 44 percent so far this year, four times the rise of the Dow Jones transportation index. CSX shares closed up 99 cents, or 1.6 percent, to $63.23 on the New York Stock Exchange.

TCI's investment in CSX has stirred some complaints that a foreign-headquartered entity has taken a stake in a key piece of the United States' transportation infrastructure.

CNN television anchor Lou Dobbs earlier this month called for a federal investigation into TCI's interest. Some shareholders at the meeting echoed those concerns.

"CSX is part of America's infrastructure, and I don't want to see any bloody foreigners divvying it up," said shareholder Charles T. Heimerdinger, who said his family has owned stock in CSX and its predecessors for 70 years. He owns 9,541 shares.

Heimerdinger said it was disgraceful for the London-based fund to try to get seats on the board after "we saved you from the Huns twice in the past century." Another shareholder, former employee Al Carpenter, told management he was satisfied with its leadership.

"I want to congratulate you on doing a great job," Carpenter said. "I don't know as I could have said the same four years ago." Others said fresh blood would be good for the board.

"I'd like to know more about what's going on in the company and what their plans are," said Daniel Carleton of Dunnellon, Florida, who owns around 200 shares of CSX. "It might not be a bad idea to have an outside voice on the board."

The meeting was held in an air-conditioned tent erected in the railroad's Gentilly railyard in New Orleans, which was heavily damaged three years ago by flooding following Hurricane Katrina, but has since been rebuilt.

On an intensely rainy day, the tent sprouted some leaks and at one point the pounding rain drowned out Ward's remarks to shareholders.

Separately, CSX said it was raising its quarterly dividend to 22 cents from 18 cents.

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