(Bloomberg News circulated the following story by Angela Greiling Keane on June 16.)
NEW YORK — CSX Corp. shareholders should vote for the railroad’s board slate over nominees backed by hedge funds TCI Fund Management LLP and 3G Capital Partners Ltd., a proxy advisory firm said Monday.
The report by Egan-Jones Proxy Services is a victory for CSX as it works to defeat the funds’ five director candidates. TCI and 3G are pushing the lineup at CSX’s June 25 annual meeting to help prod the third-largest U.S. carrier to boost rates and take on more debt to finance stock buybacks.
CSX has delivered buybacks, dividend increases and “industry-leading shareholder returns,” while the funds’ bid for five seats on a 12-member board is out of line with their holdings, Egan-Jones said. Their stake is about 8.7 percent.
“Criticism can be laid at the feet of both sides regarding their conduct,” Egan-Jones said. “However, we believe that support for the slate of directors proposed by management is in the best interest of the company and its shareholders.”
The report by Egan-Jones was the first on the CSX fight by an outside proxy adviser. Egan-Jones also opposed a TCI proposal that would make it easier for CSX shareholders to call meetings. TCI and 3G are the third- and fourth-largest investors in Jacksonville-based CSX.
CSX fell 29 cents to $65.13 Monday in NYSE composite trading. The shares gained 49 percent this year before Monday, the most in the Standard & Poor’s 500 Railroads Index and almost double the 26 percent return of Burlington Northern Santa Fe Corp., the next-best performer.
“The Egan-Jones recommendation reaffirms our belief that we have the right board in place to continue driving sustainable shareholder value creation at CSX,” said Andrew Siegel, a CSX spokesman who works for Joele Frank, Wilkinson Brimmer Katcher.
Jonathan Gasthalter, a spokesman for London-based TCI who works for Sard Verbinnen & Co., had no immediate comment.
Egan-Jones said it disapproved of CSX’s decision to defer the company’s annual meeting, which will be held at a New Orleans rail yard. Shareholders met last year in May at an Indianapolis hotel.
The recommendation in favor of management also took into account the hedge funds’ rejection of a CSX offer of three board seats on condition of accepting a two-year “standstill agreement,” Egan-Jones said.
TCI is supporting two of CSX’s 12 board nominees.