CSX Names Hunter Harrison CEO In Win For Activist Investor

Hunter Harrison used to be CEO of Canadian Pacific

TODD KOROL REUTERS Hunter Harrison used to be CEO of Canadian Pacific

Three incumbent CSX directors intend to complete their board service at or before the conclusion of the 2017 annual meeting.

In his four years as CEO of Canadian Pacific, Harrison cut staff, stored locomotives and pushed the railroad to run longer and faster trains to reduce fuel and labour costs.

Harrison replaces Michael Ward, who announced his decision to retire as CEO on February 21 after 14 years in the role. The new directors are Harrison, Hilal, Dennis Reilley, Linda Riefler and John Zillmer, according to a CSX press release. As a result, the board will be made up of 13 members.

The lauded railroad turnaround specialist was officially installed as CEO of CSX Corp. late Monday as the company acquiesced to most of the demands of the activist investor backing his candidacy.

This evening, post-close, it became official that Hunter Harrison will become CSX Corporation's (NASDAQ:CSX) next CEO.

CSX also said Edward Kelly, a director since 2002, is succeeding Ward as chairman of the board. The options will vest over four years. Mantle Ridge's 4.9% stake in the company is now worth $US 2.3bn.

Harrison informed CSX that he accepted the CEO position on the condition that the railroad ultimately provides the replacement protection initially offered by Mantle Ridge upon his departure from CP.

Following the agreement, Hilal said the CSX board was "united behind a shared goal - creating value for shareholders and all stakeholders". In his last two undertakings at Canadian National and Canadian Pacific, he delivered 321% and 350% total shareholder return, respectively'.

"Harrison has indicated that he will resign after the meeting if the reimbursement and tax indemnity are not provided", CSX said. And CP said that Harrison had approached the company's board to "discuss his retirement from CP and potential related modifications to his employment arrangements that would allow him to pursue opportunities involving other Class 1 Railroads". This would be achieved by implementing at CSX the Precision Scheduled Railroading model that Harrison had developed during his successive appointments at Illinois Central, CN and CP.

Harrison and Mantle Ridge still want CSX to foot this bill, while CSX has said this is "inappropriate" and wants to put the matter to a shareholder vote at an annual meeting likely to be held this spring. He resigned as CP CEO earlier this year.

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