By Justin Franz
MONTREAL — One of Canadian National’s biggest shareholders is threatening to wage war on the leadership of the Class I railroad if it does not drop its bid for Kansas City Southern. Just a week after calling for the resignation of CN CEO J.J Ruest, TCI Fund Management announced that it had hired the same firm that helped oust Canadian Pacific’s CEO back in 2012 to try and shake things up at CN.
The outcry from TCI comes after the U.S. Surface Transportation Board derailed CN’s bid for KCS. Since then, CP had reentered negotiations with KCS. If CP and KCS once again agree to merge, CN could lose billions of dollars.
On Tuesday, TCI announced it had hired Kingsdale Advisors, a leading strategic shareholder advisory and communications firm, to act as its strategic advisor and engage with CN shareholders. TCI plans on naming a slate of five new board members and calling its own shareholder meeting to vote on them if CN doesn’t drop its bid for KCS. If those members get approved by CN’s shareholders, they will have a mandate to name a new CEO. Kingsdale was hired by Bill Ackman in 2012 and helped him change CP’s board of directors, which in turn appointed railroad turnaround artist Hunter Harrison to lead the company.
“We believe CN’s best days are ahead of it, provided the company immediately withdraws from its reckless, irresponsible, and value destructive pursuit of KCS,” said Chris Hohn, TCI founder and portfolio manager. “The ‘copy-cat’ bid for KCS, combined with CN’s continued operational underperformance, make the case for change compelling and clear.”
TCI owns more than 5 percent of CN’s stock. The portfolio manager pinned the blame on the KCS debacle squarely on CN’s board of directors and said that a shareholder meeting would be called soon.
“The Board now lacks all credibility so new directors must be appointed that has more railroad experience and expertise,” Hohn said. “The CEO should also be replaced with a railroader that has a proven track record in order to create a much-needed culture of operational excellence.”
