The search for a new executive at the Canadian National Railway Company (CN) takes an unexpected turn: Jim Vena, approached by several observers to take control of the company, withdraws – a decision which sparks more questions only answers.
This decision surprised analysts and was badly received by investors. On the Toronto Stock Exchange on Monday, the title of the country’s largest carrier in the country fell 5.9%, or $ 9.62, to close at $ 154.50.
Anthony Hatch of ABH Consulting is amazed at this turn of events.
The New York analyst expected CN to decide between Mr. Vena – the candidate proposed by TCI Fund Management, the militant investor in the middle of a standoff with the railroad – or someone else.
“What I did not expect is that it is not Jim and we still do not know who will be the next leader,” he explains over the phone.
According to CN, Mr. Vena, 61, a resident of Arizona according to his LinkedIn profile, withdrew on Sunday. He would have had “several talks” with the largest rail carrier in the country, whose current president and CEO Jean-Jacques Ruest, 67 years old and bilingual, is in principle to leave his post next month.
PHOTO FROM UNION PACIFIC WEBSITE
Jim Vena was seen by many analysts as the favorite to take control of CN.
The reasons for the withdrawal of Mr. Vena, a senior executive at U.S. rail carrier Union Pacific until the end of 2020, have not been clarified. The main party did not respond, Monday, to messages from Press, like TCI.
“A number of questions remain unanswered,” says Walter Spracklin of RBC Capital Markets. Did he just withdraw or was he no longer interested? If so, why? Who is now the main candidate? ”
The identity of the person who will take over the helm of CN is expected to be announced in January.
Central piece
A veteran of the rail industry, Mr. Vena worked for four decades at CN, where he was COO from February 2013 to June 2016. He was the go-between for TCI, the second largest shareholder of the largest carrier. rail in the country (5.2%), which forced a special meeting to be held on March 22 to replace 4 of CN’s 11 directors with candidates it chose. The railway company did not indicate whether the event was canceled.
“Mr. Vena was three months away from potentially securing the post of president of the railroad where he has spent much of his career,” says Hach. Something certainly happened. The battle [entre TCI et le CN] probably played a role. ”
The US analyst also believes that the industry veteran could be interested in some positions that could potentially open. For example, CSX big boss Jim Foote is 66 years old and could be approaching retirement age. He has not been publicly named a successor, says Hatch.
It was in the spring that TCI began to publicly criticize CN, which was trying to acquire Kansas City Southern. The US railroad finally opted for the offer to purchase Canadian Pacific Railway last September.
The militant fund demanded the departure of Mr. Ruest and the chairman of the board of directors Robert Pace. In his view, rather than embarking on a costly acquisition project, CN should have focused on improving the efficiency of its operations.
Even if he can no longer count on the candidate he wanted to see as head of CN, TCI nonetheless got what he wanted, says Hatch. On the one hand, the current boss will soon bow out, while the retirement of the chairman of the board is scheduled for 2022.
Scotiabank analyst Konark Gupta also believes TCI may continue its efforts to promote Mr. Vena’s candidacy for president at the March 22 meeting.
CN says it has “spotted” candidates and met others. The company is subject to Official Languages Act. So far, she has declined to say whether fluency in French would be taken into account.
This issue has returned to the fore since the linguistic storm unleashed by Air Canada President and CEO Michael Rousseau.
Some names mentioned as candidates by analysts
- Mike Corey: Chief Operating Officer of CN until May, the latter spent 40 years with the company. According to his LinkedIn profile, he is currently a consultant.
- Rob Reilly: After 30 years with US rail giant BNSF Railway, he has worked for CN since 2019 and serves as Chief Operating Officer. He is closely involved in the management of activities.
- Sameh Fahmy: Perfectly bilingual, this former CN executive has just completed a three-year term at Kansas City Southern (KCS). Asked by Press, the 70-year-old confirmed having met his former employer, without giving further details.
- Others: the railway could choose a candidate whose name has not been mentioned. For example, KCS executives may have to look for work as the company moves into Canadian Pacific Railway.
One of CN’s major shareholders, Melinda French Gates, sold off part of her stake in the railroad earlier this month, allowing her to pocket US $ 467 million, according to a filed document. with US regulatory authorities. Between December 7 and 12, it sold 3.7 million shares at an average price of US $ 127.84. Mme French Gates still owns a 4.7% stake in CN. The latter won a block of shares in the railroad in the wake of her divorce last spring from Microsoft co-founder Bill Gates.