Posts Tagged ‘Canadian Pacific’

Mantle Ridge Disputes CSX News Release

February 18, 2017

Hedge fund Mantle Ridge took issue with some facts contained in a CSX news release issued earlier this week on the subject of E. Hunter Harrison becoming the railroad’s CEO.

CSX logo 3Mantle Ridge head Paul Hilal said he wrote to the CSX Board of Directors to take issue with the news release, in particular the size of the compensation package for Harrison and Milal’s demands for governance changes for the CSX board.

“We owe it to the shareholders to get a deal done promptly. Let’s do it,” Hilal wrote. “If you are willing, we are glad to meet in person and hammer this out this weekend, hopefully delivering good news to the shareholders early next week.”

In the meantime, Harrison told the Wall Street Journal that he was frustrated with what he described as “chest pounding” between his investment partner and CSX, which has resulted in a stalemate in the negotiations for him take over as CSX as its CEO.

The newspaper reported that CSX had offered the CEO post to Harrison, but that Hilal, a principle at Mantle Ridge, has refused to give in on compensation and governance demands. Hilal, who is representing Harrison, has conducted most of the discussions with CSX.

Mantle Ridge holds less than 5 percent of CSX stock but wants to name six directors to the railroad’s board of directors and reduce the number of directors to 12,

In the news release, CSX said it is reluctant to allow a shareholder with such a small share of its stock to dictate the composition of its board. CSX also has described the demands to give Harrison a $300 million compensation package as “extraordinary in scope.”

The Journal said that during a recent meeting with Mantle Ridge, some CSX shareholders objected to the number of seats on the board that Mantle Ridge wants.

Hilal reportedly said during the meeting he needs to control six seats so that Harrison “has control and can execute his plan.”

CSX reportedly is objecting to paying Harrison the $89 million he gave up by leaving early as Canadian Pacific’s CEO in return for receiving a limited waiver of a non-complete clause.

Hilal contends that the compensation deal that Mantle Ridge is seeking from CSX is $200 million and includes $120 million of stock options, about half of which are tied to “very real” performance measures.

Another sticking point is the 72-year-old Harrison’s refusal to agree to have a physical exam by an independent physician.

Harrison told the Journal he was willing to negotiate his pay with the CSX board,

In his letter, Hilal contended that Harrison wants $32 million per year over four years – or $128 million – of which $20 million per year is performance-based.

“His package is worth very little unless he performs spectacularly,” Hilal wrote. As for the changes on the CSX board, Hilal said he is only seeking a seat for himself.

Harrison would occupy another seat along with four other independent directors who would be agreed upon by CSX and Mantle Ridge

“Why are we asking that new directors be added? As we’ve discussed, precision scheduled railroading requires dramatic operational and cultural change,” Hilal wrote. “Change like that starts at the top, with significant new blood on the board not wed to the old ways or legacy decisions and with no ties to any previous strategy or anyone.”

CP Won’t Bar Harrison from Working for CSX

January 25, 2017

A regulatory filing made by Canadian Pacific with the U.S. Securities and Exchange Commission shows where E. Hunter Harrison can and cannot work under the terms of his non-compete agreement with CP.

E. Hunter Harrison

E. Hunter Harrison

Harrison, who recently stepped down as CP’s CEO, cannot work for Canadian National, BNSF or Union Pacific. But he could work for CSX, Norfolk Southern or Kansas City Southern.

CP granted Harrison a limited waiver of the non-compete clause, which also included waiving a provision that Harrison is not permitted to solicit for employment at another company any CP employees above the level of manager.

Specifically, CP’s waiver makes an exception for the railroad’s chief of staff.

News reports have said that Harrison is teaming up with activist investor Paul Hilal of the firm Mantle Ridge to oust CSX CEO Michael Ward.

Some believe that Harrison would use being the head of CSX to lead a merger effort. Last year Harrison and CP unsuccessfully sought to merge with NS.

If Harrison does make a bid to become part the CSX CEO, he will have until Feb. 10 to do so under the terms of the CSX bylaws for nominating members of the board of directors and filing resolutions to be heard during the annual meeting, which is usually held in May.

CSX Responds to Harrison Moves

January 21, 2017

CSX responded to news reports that E. Hunter Harrison may seek to oust current CSX management by issuing a statement that supported the company’s current executive team and its strategies.

CSX logo 3A CSX spokesman said in the statement: “CSX Corp. welcomes the views of all of our shareholders and always considers their thoughts on the company’s business strategy. Likewise, its board and management team remain supportive of the company’s strategic growth strategy, which has started to deliver sustainable value for shareholders.

“The company and its board of directors will actively evaluate Mantle Ridge’s views and look forward to discussing our core strategy to continue driving earnings growth and shareholder value going forward with Mantle Ridge and all our shareholders.”

The statement referred  to reports that Harrison is retiring from Canadian Pacific earlier than planned and has teamed up with venture capital firm Mantle Ridge to seek to oust CSX CEO Michael Ward.

Harrison would, presumably, become the CEO of CSX and install his own management team.

 

 

Harrison Eyes Taking Over CSX as CEO

January 19, 2017

E. Hunter Harrison is back in the takeover game and setting his sights on wresting away control of CSX from current CEO Michael Ward.

E. Hunter Harrison

E. Hunter Harrison

The Wall Street Journal reported this week that Harrison, who fought an unsuccessful bid in early 2016 to acquire Norfolk Southern, has teamed up with Paul Hilal, a principal at hedge fund Mantle Ridge, to prod CSX to make a management change.

Hilal was formerly with Pershing Square Capital. The latter is run by William Ackman, who played a key role in getting Harrison named CEO at Canadian Pacific in 2012 after winning a proxy fight.

Harrison, 72, this week said he is severing his ties with CP before his official retirement from the company.

He will be succeeded at CP by Keith Creel, effective Jan. 31. In the interim, Harrison is reported to be on vacation and Creel will assume Harrison’s duties.

Harrison has agreed to sell all of his shares of CP stock by May 31 and the CP board of directors agreed to provide him with a limited waiver of a non-compete clause to which he would otherwise be subjected.

In return for waiving the non-compete clause, Harrison will forgo all roles he had with CP and give up substantially all benefits and perquisites to which he was entitled. The total value of those forfeited benefits is $89 million.

The CSX takeover attempt would be Harrison’s second. CSX rejected his overtures in 2014.

The WSJ reported that CP will not participate in any effort that Harrison makes to gain control of CSX.

Hilal left Pershing Square last year to start his own activist fund, which has raised more than $1 billion for a single investment, according to the WSJ. Those investors reportedly have committed to keeping money in the fund for five years.

Harrison became the CEO of CP after Ackman led a proxy fight that resulted in the ouster of CP CEO Fred Green.

If Harrison and Hilal follow that same script at CSX, they will seek to oust Ward, who has indicated he plans to retire in 2019.

Hilal was with Pershing Square at the time of the CP takeover and recruited Harrison, who had been CEO of Canadian National.

Railway Age magazine quoted Cowen and Company Managing Director Jason Seidl as observing, “Hunter left C$118 million in equity awards on the table, which indicates to us he still has a burning desire to run a railroad. His reputation of being the most sought after manager in the North American railroad industry could make it very difficult for CSX to refute Harrison’s desire to run its franchise.”

Seidl told Railway Age that a CSX takeover would differ from what Harrison attempted at NS because the latter involved a merger whereas the CSX gambit would be just a management switch.

Railway Age quoted an unnamed railroad industry analyst as predicting that if Harrison is able to become head of CSX a merger with CP will not likely be one of his first priorities.

The analyst said that Harrison could be expected to change the CSX engineering, train operations and capital investments plans that Ward’s management team has been implementing over the past year.

Given Harrison’s track record, the analyst expects that he would impose at CSX a more aggressive capital expenditure downsizing and reduce its labor force.

Harrison would not be likely to institute more aggressive marketing and selling promotions, but would oversee creating more discipline in CSX train operations.

I Just Felt Like Shooting a CP Unit

October 14, 2016

 

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berea-october-9-03-x

I don’t know why, but I just felt like photographing this Canadian Pacific locomotive at Berea.

It’s not leading and there is nothing special about this unit. But it was the first thing I saw when I arrived to spend a few hours on a Sunday morning.

It was a day of sun and clouds and sometimes you got the sun and sometimes you didn’t. Also shown is the eastbound Q158 and the eastbound Q090. In both instances I tried to emphasize the clouds and sky, which were nice on Sunday.

The Q090 is a train that I haven’t seen for awhile. It was also the first time I’d seen it since UP and CSX began teaming up to offer express produce service from Washington State.

Photographs by Craig Sanders

Indiana Northeastern Buys 6-Axle Power

September 24, 2016

The Indiana Northeastern Railroad has acquired a pair of six axle locomotives, its first.

indiana-northeasternUntil now the short line railroad that serves Indiana, Ohio and Michigan had relied on four-axle EMD diesels.

Now Indiana Northeastern has purchased a pair of SD40-2s from Motive Power Resources in Minooka, Illinois.

The units formerly worked for Canadian Pacific and Southern Pacific with the ex-SP unit still having its flared SD45 car-body.

Indiana Northeastern president Gale Shultz said two factors prompted his railroad to seek larger locomotives.

“In the next year, we have to equip for positive train control to get in and out of the Norfolk Southern yards at Montpelier, Ohio,” Shultz said. “We are running 85-car unit trains and I can’t see spending money on one of the old girls.”

Shultz said both SD40-2s have been rebuilt from the frame-up by Alstom Canada and were last used in a CSX Transportation lease fleet.

“’These are sixteen cylinders, new controls and wiring, we hope to have the first one here in a week,” he says.

Indiana Northeastern General Manager Troy Strane told Trains magazine that one six-axle unit will be paired with a four-axle unit to move unit grain trains.

“I think one of these can easily do the work equal to two or three of our four-axles. We have a lot of small hills and curves, its real railroading and moving these unit trains is rough on the power,” Strane said.

The SD40-2s are unlikely to be repainted into Indiana Northeastern colors until next spring because they are needed immediately to help with the grain harvest that is getting underway.

NS Touts Improvements on ex-D&H Line

September 21, 2016

A year after it took over operation of a former Delaware & Hudson line between Sunbury, Pennsylvania, and Schenectady, New York, Norfolk Southern said it has made significant infrastructure improvements.

NS logo 2In a news release, NS said it has installed 90,000 new ties, resurfaced 84 miles of track, and made improvements to the Belden Tunnel in New York.

NS purchased the 282-mile line for $214.4 million from Canadian Pacific and hired 166 new employees, including 140 ex-D&H workers.

The line how hosts an average of eight trains a day and has attracted additional rail traffic that had gone by truck.

NS said that its intermodal terminals in Ayer, Massachusetts, and Scranton, Pennsylvania, have posted double-digit volume growth during the past year.

The former D&H line connects with the NS system at Sunbury and at Binghamton, New York.

There is also a connection with Pan Am Southern at Mechanicville, New York, which provides NS with a single-line route between Chicago and southeastern U. S. markets and the capital region of New York.

Oh, How Dark Room Work is Easier Now

August 22, 2016

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When I was young, I had access to my Dad’s darkroom, so I began railfanning using black and white film.

For me it was dangerous. Film developing and printing consisted of dangerous chemicals, a sealed room in which I’d breathe their vapors, and the foolishness of youth in not wearing gloves but dipping my hands in the chemicals.

It also was time consuming and hard to get a really good image.

Today, with Lightroom and Photoshop, this is done digitally with much better control over each step.

First the image is scanned into the computer. With the scanner maker’s provided software there are many controls over the outcome simply by using the software for general corrections.

Then comes Lightroom where the image is digitally manipulated with far greater precision than could be done in a darkroom in a similar amount of time.

Not only are there exposure and contrast, there are sliders for highlights, shadows, saturation, cutting down on grain using noise reduction, etc., along with being able to remove chromatic aberration, clone out scratches, etc.

Next comes Photoshop for the finishing tweaks, including cloning out those hard to remove tiny defects and sizing the image for use on different sites.

Here is Canadian Pacific 4074 sitting in the CP roundhouse in Toronto in June 1972. The detail, contrast, exposure were all changed or improved along with other tweaks.

Could I do this in a darkroom? Perhaps, if I had many hours.

Thankfully, I live in 2016. While the late 1960s was a wonderful time to railfan, I’d hate to be limited to only that period’s technology.

After all, only a few could see a railfan’s work this way instead of putting the images on sites like this blog where many can share and enjoy various railfans’ work.

Article and Photograph by Robert Farkas

 

Rail Executives See Growth later in 2016

June 17, 2016

Railroad executives speaking at a conference in Boston this week expressed optimism that freight traffic will pick up in the second half of this year.

Those predictions come at time when the weekly and monthly traffic reports issued by the Association of American Railroads have been showing a downward trend in freight traffic.

train image2Speaking to the Citi Industrials Conference, Canadian National Chief Financial Officer Luc Jobin expects intermodal traffic to begin growing.

Jobin, who will become CN’s CEO next month, also sees growth in automotive, lumber and grain.

He noted that much of last year’s harvest is still sitting in storage because farmers are hoping that market prices for grain will rise.

Canadian Pacific President and Chief Operating Officer Keith Creel also expects grain shipments to rise along with the haulage of potash.

Creel noted that lackluster traffic has led CP to place 44 percent (662 units) of its high-horsepower locomotives in storage with 823 engines still in revenue service.

CSX Chief Financial Officer Frank Lonegro said that although his railroad’s overall traffic is down 9 percent this year, domestic intermodal shipments are up 5 percent in the second quarter.

Coal shipments on CSX are down 33 percent, although some of that is because utility companies still have large stockpiles of coal that they are drawing upon.

Norfolk Southern’s chief financial officer, Marta Stewart, said coal traffic is down 27 percent.

She said low natural gas prices have meant that Appalachian coal is not competitive as a fuel for utilities to use to generate electricity.

NS traffic overall is down 8 percent in 2016. Merchandise traffic is down 5 percent and intermodal traffic has been flat.

Stewart predicted that merchandise and intermodal traffic would post gains for the year and automotive traffic also would grow.

AAR has said that overall rail traffic through June 11 has fallen 8.5 percent this year when compared with the same period in 2015.

The trade association has cited weak consumer demand, challenging energy and commodity markets, low fuel prices, excess truck capacity, and the strong U.S. dollar as combining to depress rail freight traffic.

Harrison Continues to Preach Gospel of Mergers

April 21, 2016

He may have lost a round, but Canadian Pacific head E. Hunter Harrison continues to preach the gospel that railroad mergers are inevitable.

Speaking during a first quarter earnings call, the CP CEO said it’s a question of when – not if – there will be railroad mergers that result in transcontinental systems.

Canadian Pacific“This is not going away,” Harrison said, adding that shippers do not necessarily oppose mergers but are wary of them due to the poor execution of previous mergers.

He cited the breakup of Conrail by Norfolk Southern and CSX, and the merger of Union Pacific and Southern Pacific.

As Harrison sees it, his proposal to acquire NS fell victim to service failures that followed those consolidations.

And he didn’t like it. “I used to hate to get a spanking for something my sister did,” he said.

Harrison said mergers will be needed to handle rising traffic in future decades and to compete against trucks.

He said solving congestion problems in Chicago will continue to be a challenge for the railroad industry.

During the call, CP said it posted record financial results for the first quarter despite a 5-percent decline in traffic volume. The Calgary-based railroad also said that it would buy back some of its shares and increase its stock dividend.