USA: Activist investor Ancora Holdings Group has written to the board of Class I railway CSX calling on it to explore options to merge with BNSF or Canadian Pacific Kansas City.
This follows Union Pacific’s recent confirmation of plans to merge with Norfolk Southern.
Ancora’s letter dated August 6 and made public on August 19 is highly critical of CSX Chief Executive Joe Hinrichs. It says ‘time is of the essence’ for CSX, because ‘once Norfolk Southern and Union Pacific start operating as a unified transcontinental railroad, no railroad has more to lose than CSX.’
Ancora says Berkshire Hathaway-owned BNSF ‘is a cash buyer that would bring a highly disciplined approach to any negotiations, rendering CSX in a vulnerable position if it does not have alternative parties to speak with’.
CPKC ‘represents a compelling partner for CSX as it looks to compete in a new railroading environment’ and engaging with the Canadian company ‘may be the best way to create competitive tension that accelerates a path to an excellent deal’. Ancora says ‘the US government could have difficulty approving an acquisition by a Canadian railroad’, but ‘a transaction could be structured as a reverse merger under which CSX acquires CPKC.’
If CSX cannot find a merger partner, Ancora wants the board to replace Hinrichs.
In an analyst note Citi’s Ariel Rosa described the Ancora’s letter to CSX as unnecessarily aggressive, saying ‘by pushing CSX to be a forced seller, we worry that Ancora risks deteriorating CSX’s negotiating position’.
Reuters reports that TOMS Capital has also recently acquired a stake in CSX and is seeking talks with the board.
