Hunter Harrison and the Mantle Ridge hedge fund will get their day before the CSX board of directors and shareholders.
Mantle Ridge has proposed making Harrison the CSX CEO. Harrison last month retired early as head of Canadian Pacific so that he could, presumably, seek the top job at CSX.
Harrison and CP sought unsuccessfully to merge with Norfolk Southern l;ast year but that company’s board rejected the overtures.
In a news release, CSX said Mantle Ridge has acquired less than 5 percent of its stock but is seeking compensation and control far in excess of the scope of its stock ownership.
CSX acknowledged that it has held talks with Harrison and Mantle Ridge during which the hedge fund demanded substantial representation on the CSX Board and that Harrison immediately replace current CSX CEO Michael Ward.
The railroad said it has made several offers to Harrison and Mantle Ridge that would have made Harrison the CSX CEO and given Mantle Ridge three seats on the CSX board.
Mantle Ridge has rejected those offers and countered with its own demands, many of which focus on Harrison’s compensation and the composition of the CSX board.
One noteworthy point made in the CSX news release is that Mantle Ridge has agreed to compensate Harrison for the millions of dollars he agreed to forgo when he retired early from CP. Mantle Ridge wants CSX to make up most or all of that.
Harrison has also rejected a CSX request that he take a physical exam.
CSX said in its statement that it is wary of granting control to a shareholder who holds less than 5 percent of its stock and is demanding benefits from CSX that may exceed $100 million.
CSX said the requested reimbursement and tax indemnity could exceed $300 million and are thus extraordinary in scope and structured largely as an upfront payment and as equity grants that would be payable to Mr. Harrison upon his death or disability with only a portion of the equity grant including any performance metrics.
“The CSX Board is committed to being responsive to the interests of its shareholders and has closely observed the market reaction to Mr. Harrison’s possible employment,” the railroad said in its statement. “Accordingly, in light of the unusual circumstances surrounding Mantle Ridge’s approach the CSX Board has decided to seek guidance from shareholders on whether CSX should agree to Mr. Harrison’s and Mantle Ridge’s proposals.
CSX said it would schedule its regular board meeting, usually held in May, after the special March meeting.