The standoff continues between the Canadian National Railway Company (CN) and its second shareholder. The latter accuses the Montreal company of having failed to attract its favorite candidate and asks him to take a break from his research to find his next leader – which does not appear in the plans.
TCI Fund Management was trying to install Jim Vena, an industry veteran and senior executive at U.S. rail carrier Union Pacific until the end of 2020, at the helm of CN. The 61-year-old withdrew, but the reasons were not disclosed.
The London hedge fund, which owns a 5.2% stake in the nation’s largest railroad, says the process put in place by CN’s board of directors was “flawed” and “unreliable.”
We are not surprised that the board has once again failed to attract the best candidate for the job.
TCI Fund Management, in a statement, Thursday
According to the firm, the research should be delayed until the end of a special meeting of shareholders scheduled for March 22, where it hopes its four candidates for the board of directors will be elected.
CN, for its part, plans to announce next month the identity of the person who will succeed Jean-Jacques Ruest, its current chairman and CEO, who is expected to bow out at the end of January. TCI called for the resignation of Mr. Ruest.
” Shareholders [pourront] vote to choose the people who should lead the vital search for a CEO, the firm believes. The person who will occupy the position […] must be confident that she will benefit from the unwavering support of the board, which is not the case at present. ”
CN did not respond to the exit from the hedge fund. The company led the questions sent by Press to her press release published last Monday in which she stressed that her research was continuing. TCI declined to elaborate on the reasons that prompted Mr. Vena to withdraw from the leadership race.
“Effective” pressures
With an approximate 8.4% stake, TCI is also the largest shareholder of Canadian Pacific Railway (CP), CN’s main competitor, raising questions among some observers of the rail industry.
RBC Capital Markets analyst Walter Spracklin says CN is unlikely to postpone the appointment of its next executive.
Regulatory law specialist Mark Warner of Toronto-based Maaw Law expects TCI to continue its efforts to get a seat on CN’s board of directors.
The pressure from TCI was effective. The fund appears to have played a role in the decision taken by [M. Ruest] to give up its place.
Mark Warner, Regulatory Lawyer
It was in the spring that TCI began publicly criticizing CN as the railroad attempted to acquire the Kansas City Southern (KCS), also coveted by CP. The American company finally opted for the offer to purchase Canadian Pacific Railway last September.
In the British firm’s opinion, rather than embarking on a costly acquisition project, CN should have focused on improving the efficiency of its operations.
Mr. Warner believes that TCI’s presence in the CN and CP shareholding raises competition issues and believes regulators should look into the situation.
The fund did not want to answer questions sent by Press in relation to its interests in the two main railways in the country.