Investor Hilal denies he wants to control CSX, after railroad lists concerns

© Wangkun Jia

US investor Paul Hilal has denied he is in a “battle for control” of US rail carrier CSX, as his investment fund Mantle Ridge continues to seek board representation and install Hunter Harrison as the new CEO

A CSX statement lists concerns over the remuneration package and other conditions of Mr Harrison’s appointment. However Mr Hilal denies he wants six Mantle Ridge employees on the board, and nor was Mr Harrison seeking a $300m upfront fee to take the top job.

He said: “The press release suggests that Hunter is asking for a $300m compensation package,” said Mr Hilal. “In our view, that’s a major mischaracterisation, which, regrettably, has confused the shareholders.”

He said the package for Mr Harrison was $32m a year for four years, of which $20m a year would be “explicitly” performance-based.

However, Mantle Ridge also wants CSX to reimburse the $84m Mr Harrison forfeited to free himself from a non-compete clause with former employer Canadian Pacific.

But, Mr Hilal added: “This should not be viewed as compensation.”

He also claimed Mantle Ridge only requested a single representative on the board, plus the appointment of Mr Harrison and several independent members.

“Neither Hunter nor the other board slots discussed represent Mantle Ridge in any way,” said Mr Hilal. “You [CSX] agreed that the board would not consider any of the people on the list [11 suggested candidates] surrogates of mine, or anything but truly independent and qualified.”

He said that the need for new directors was to provide the “dramatic” operational and cultural change required for Mr Harrison to be able to reverse CSX’s dwindling prospects, and he questioned the board’s commitment to its proposed transformation.

“I was made somewhat cautious when the board’s letter to Hunter proposed he be hired for only two years, not the four we explained was necessary,” he said. “That lack of commitment could create material risk to the timely and successful implementation of precision scheduled railroading.”

Mr Hilal added that a lot of the points raised in the CSX statement could have been addressed through continued talks, but these had largely stopped.

“Hunter and I (and our counsel) repeatedly asked for a counter on the compensation and governance terms, but we never received one,” said Mr Hilal. “Instead, we have a special meeting that will distract current management and – more importantly – will delay roll out and disrupt the company’s operations.”