Eastern Railroad Discussion > CSX: Mantle Ridge fires back

Activist investor Paul Hilal, leader off Mantle Ridge investments, has written to the CSX board. He is responding to the CSX board seeking an advisory vote from all share owners on what CSX describes as an unprecedented compensation arrangement for E Hunter Harrison.

Hilal denies the company has requested six seats for Mantle Capital. He says only he and EHH are part of Mantle Capital. The other proposed directors aren't employees or investors apparently.

Hilal confirms that CSX offered EHH a two year deal, not acceptable as it will take at least four years to implement the Precision Plan.

Hilal mocks the "$300mn" compensation deal, and says the deal was $32mn. The rest would come out of the savings and profit improvements


(As usual in these give and take situations, each side stretches terms and wording to emphasize its strong points and minimize or ignore its weaknesses.  With the share price up in the high 40s, the market would be expecting any poxy offer to start in the high 50s, I'd think

There's also a wild card that the other railroads may already have a plan to divide CSX, or purchase key lines, etc. That would undermine Mantle Ridge's offer, and leave them dickering with EHH over the benefits he gave up from CP.  As of now, Hilal is on the hook for those obligations, it seems.)
 

This is starting to look / sound like a organ grinder, up til now we only saw the monkey rattling the cup, now the song starts to play, my two cents

Ed Stewart
Jacksonville, FL

There needs to be a friction management system installed to protect EHH, Halil, Mantle Ridge and CSX.
Good luck with that.
Gonut

calsubd Wrote:
-------------------------------------------------------
> This is starting to look / sound like a organ
> grinder, up til now we only saw the monkey
> rattling the cup, now the song starts to play, my
> two cents

You almost made me spit coffee! LOL :-)

Maybe the other railroads don't want EHH/Mantle anywhere close to CSX?  Maybe that upsets the applecart of railroading way too much for their comfort?   If the other railroads are involved, I see a big struggle, as they protect their interests, and look for openings to gain advantage.

EHH gets in at CSX. EHH starts to "clean house". First to go are "redundant management". Then maintenance programs cuts or severely reduced. Next up, carve up mainlines and other lines. The mad scramble insues. Burlington Northern Santa Fe, with real deep pockets (highest bid), gets the Chicago-New New York/Northern Jersey mainline (The New York Central). Union Pacific gets Chicago-Washington DC/Baltimore via Pittsburgh mainline (Baltimore & Ohio). UP gets New Orleans-Jacksonville mainline (Louisville & Nashville). BNSF gets New York to Atlanta to Memphis (two transcons for UP and BNSF each). BNSF also gets Atlanta-Jacksonville line. Norfolk Southern gets more coal lines through West Virginia,the old Chesapeake & Ohio, and some of the other lines in Tennessee, Georgia and Indiana, etc. The rest get split up and sold to the Genesee & Wyomings and RJ Cormans of the shoreline world. In effect, no more Chessie Seaboard (CSX Transportation). EHH and the Hedge Fund make off with all that money from the liquidation of CSX and ride off into the sunset. Dooms day scenario? Maybe, maybe not. Happened to Chicago Rock Island & Pacific and others. The End.

SantaFeRuss

Posted from Android

The auto and parts business between Alabama and Michigan seems hugely profitable. Same thing with KC to Louisville and on to Detroit.

But, at the moment, the CSX board doesn't seem interested in giving EHH or Hilal any real control.

Posted from Android

 



Edited 1 time(s). Last edit at 04/13/17 15:12 by darkcloud.

SantaFeRuss Wrote:
-------------------------------------------------------
> EHH gets in at CSX. EHH starts to "clean house".
> First to go are "redundant management". Then
> maintenance programs cuts or severely reduced.
> Next up, carve up mainlines and other lines. The
> mad scramble insues. Burlington Northern Santa Fe,
> with real deep pockets (highest bid), gets the
> Chicago-New New York/Northern Jersey mainline (The
> New York Central). Union Pacific gets
> Chicago-Washington DC/Baltimore via Pittsburgh
> mainline (Baltimore & Ohio). UP gets New
> Orleans-Jacksonville mainline (Louisville &
> Nashville). BNSF gets New York to Atlanta to
> Memphis (two transcons for UP and BNSF each). BNSF
> also gets Atlanta-Jacksonville line. Norfolk
> Southern gets more coal lines through West
> Virginia,the old Chesapeake & Ohio, and some of
> the other lines in Tennessee, Georgia and Indiana,
> etc. The rest get split up and sold to the Genesee
> & Wyomings and RJ Cormans of the shoreline world.
> In effect, no more Chessie Seaboard (CSX
> Transportation). EHH and the Hedge Fund make off
> with all that money from the liquidation of CSX
> and ride off into the sunset. Dooms day scenario?
> Maybe, maybe not. Happened to Chicago Rock Island
> & Pacific and others. The End.
>
> SantaFeRuss
>
> Posted from Android

I'm not sure what NS would do with more coals lines, or any more lines in Indiana either.  AND, once you let UP or BNSF go basically coast to coast, NS would have no choice but to seek shelter in a merger.  As I stated in the other post about this, in my opinion, once you open the door to ANY of this, it doesn't stop until there is nothing left to merge.

junctiontower Wrote:
-------------------------------------------------------
> SantaFeRuss Wrote:
> --------------------------------------------------
> -----
> > EHH gets in at CSX. EHH starts to "clean
> house".
> > First to go are "redundant management". Then
> > maintenance programs cuts or severely reduced.
> > Next up, carve up mainlines and other lines.
> The
> > mad scramble insues. Burlington Northern Santa
> Fe,
> > with real deep pockets (highest bid), gets the
> > Chicago-New New York/Northern Jersey mainline
> (The
> > New York Central). Union Pacific gets
> > Chicago-Washington DC/Baltimore via Pittsburgh
> > mainline (Baltimore & Ohio). UP gets New
> > Orleans-Jacksonville mainline (Louisville &
> > Nashville). BNSF gets New York to Atlanta to
> > Memphis (two transcons for UP and BNSF each).
> BNSF
> > also gets Atlanta-Jacksonville line. Norfolk
> > Southern gets more coal lines through West
> > Virginia,the old Chesapeake & Ohio, and some of
> > the other lines in Tennessee, Georgia and
> Indiana,
> > etc. The rest get split up and sold to the
> Genesee
> > & Wyomings and RJ Cormans of the shoreline
> world.
> > In effect, no more Chessie Seaboard (CSX
> > Transportation). EHH and the Hedge Fund make
> off
> > with all that money from the liquidation of CSX
> > and ride off into the sunset. Dooms day
> scenario?
> > Maybe, maybe not. Happened to Chicago Rock
> Island
> > & Pacific and others. The End.
> >
> > SantaFeRuss
> >
> > Posted from Android
>
> I'm not sure what NS would do with more coals
> lines, or any more lines in Indiana either.  AND,
> once you let UP or BNSF go basically coast to
> coast, NS would have no choice but to seek shelter
> in a merger.  As I stated in the other post about
> this, in my opinion, once you open the door to ANY
> of this, it doesn't stop until there is nothing
> left to merge.

Norfolk Southern would have to merge up with Canadian National or as EHH originally wanted, merge with Canadian Pacific. The End, for real.

SantaFeRuss

NS is already looking to sell off coal lines (to Watco, I think), so it wouldn't likely be a buyer of CSX's coal lines.  But a package of NS and Clinchfield etc lines might be attractive to the right buyer.

The new Secretary of Commerce, Wilbur Ross, made billions combining bankrupt coal and steel companies, shutting down most of them, and modernizing the remainder.  His Sago coal mine disaster is a reminder of what happens when bare bones operators try to squeeze every penny out of a mine.