Having successfullyavoided blows from hedge fund investors The Children’s Investment Fund (TCI)and 3G Capital Partners, CSX is now in the ring to try to throw one of its own.
Therailroad company announced last week that it has filed a lawsuit against thehedge funds – which have formed a group to nominate a slate of directors tostand for election at CSX’s annual meeting this year – alleging violations offederal securities laws.
Thelawsuit filed in U.S. District Court for the Southern District of New York, alleges,among other things, that TCI has employed swap agreements in order to evade thefiling requirements of Section 13(d) of the Securities Exchange Act of 1934,and that TCI’s disclosures concerning its 11.5-percent swap position in CSXshares are materially misleading because they fail to disclose that, by virtueof agreements, understandings or relationships with TCI, swap counterpartiesintend to vote CSX shares in accordance with TCI’s wishes.
“Wefiled this suit against TCI and 3G to ensure that all of our shareholdersreceive complete and accurate information about the group’s holdings,agreements, plans and motivations to which they are entitled under federal securitieslaws,” Michael Ward, CSX chairman and CEO, said in a statement. “We arecommitted to protecting the interests of all CSX shareholders and continuing toexecute on our successful and proven strategy to further enhance value.”
Moreover,the suit states that TCI and 3G’s disclosures concerning their formation of aSection 13(d) group are false and misleading and, therefore, materialinformation that the investing publish should have regarding the group and itsintentions with respect to the company is currently unavailable.
“Byvirtually all measures the performance of CSX has been exceptional,” said Edward J.Kelly III, presiding director of CSX’s board, in a statement. “Notwithstandingthis, in an effort to avoid the disruption and expense of a proxy contest we’vespoken with TCI on a number of occasions in an attempt to find common ground.Based on these conversations the board concluded that TCI is not simplyinterested in having a representative voice on the board, but instead isseeking to achieve effective control of the CSX board of directors and dictatecompany strategy.”
CSX hasrescheduled its annual meeting – now to be held on June 25 in