(The Associated Press circulated the following on March 17.)
JACKSONVILLE, Fla. — CSX Corp. sued two hedge funds on Monday, alleging they violated federal securities laws in their attempt to make changes to the railroad company’s corporate structure.
CSX said in a federal lawsuit filed in New York that The Children’s Investment Fund and 3G Capital Partners used swap agreements to evade federal securities filing requirements. CSX claims TCI acquired more than 5 percent of its common stock without making disclosures required by law.
TCI said the ‘allegations are wholly without merit and we will defend ourselves vigorously.’
The London-based fund, along with 3G Capital Partners, owns 8.3 percent of CSX’s outstanding shares and controls derivative securities to nearly 12 percent more shares. The funds want to shake up CSX’s board, in part by making it easier for shareholders to propose the election of directors at special meetings.
The Jacksonville-based railroad company has bristled at TCI’s criticism and has rejected most of its suggestions.
In October, TCI asked CSX’s board to separate the roles of chairman and chief executive, add new directors with railroad experience and present a plan to improve operations. In December, they jointly nominated a minority slate of five directors to the board.
Edward J. Kelly III, presiding director of the CSX board, said the company has determined that TCI wants to gain control and dictate company strategy.
The suit, which seeks an injunction and sanctions against TCI, was filed in advance of the company’s annual meeting, scheduled for June 25 in New Orleans.
CSX wants TCI to divest itself of all the railroad company’s shares and terminate all swaps referencing CSX shares they entered into, renewed or extended from the time they allegedly should have been disclosed. It also asks that that TCI be prohibited from voting those shares at the annual meeting.
‘We filed this suit against TCI and 3G to ensure that all of our shareholders receive complete and accurate information about the group’s holdings, agreements, plans and motivations to which they are entitled to under federal securities laws,’ said Michael Ward, CSX chairman, president and chief executive.
‘We believe the integrity of the voting could have been undermined by some of the violations,’ Ward said in a telephone interview.
CSX shares finished the day up $2.34, or 4.8 percent, at $51.31.