Tuesday, April 22, 2008

CSX Sets a date

CSX Corp., the railroad company involved in a heated political and legal dispute with the London-based hedge fund TCI, has set a date for its 2008 shareholder's meeting.

June 25, in New Orleans.

The TCI group (which also includes 3G Capital Partners Ltd.), will solicit proxies for an opposition slate of five nominees for the board.

That's not a takeover attempt, strictly speaking. There are twelve directors, and the board is unclassified -- in other words, all twelve are up for (re-)election in any given year. That the dissidents are only nominating five means that they'll be a minority (though just barely) even if all five of their nominees end up seated around that table.

This could mean either (a) they could only find five qualified nominees willing to put their names up for this purpose, or (b) they're seeking to give undecided stockholders a feeling of security and continuity by making of point of seeking only a minority position.

CSX held a conference call on April 16 to discuss its first quarter results. Looking through the transcript, I realize that one of the predictable problems faced by any railroad is that the contract prices for hauling are fixed for long periods of time -- these "legacy contracts" can lock in the prices for hauling coal for particular shippers for up to five years. That doesn't give the management a lot of room to respond to changes in their own costs.

Good thing it's their headache and not mine, I suppose.

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