News / Merger agenda signalled as CSX announces M&A specialist as new CEO

© Jonathan Weiss

Activist investor Ancora Holdings appears to have gotten its way after CSX confirmed the ousting of chief executive Joe Hinrichs, his replacement – an M&A expert – indicating confirmation of its transcontinental-railroad-by-merger strategy.

Mr Hinrichs’ departure was confirmed yesterday, and CSX announced the appointment of Steve Angel as president and CEO.

Ancora said: “With President Donald Trump and other policymakers recently expressing enthusiasm for the benefits of a transcontinental railroad, CSX and other Class I railroads have no choice but to embrace the industry’s new realities.

“Although Steve Angel is not a railroader by trade, his M&A pedigree and value creation record indicate his appointment is an initial step in the right direction for CSX.”

The shift at the top follows calls by Ancora to see Mr Hinrichs removed, the firm issuing a public call for this in August, arguing that he had shown himself “unable to read the present state of play in the US rail sector”.

Citing discussions analysts, customers, former industry executives and regulators, and an array of current and prospective shareholders, Ancora claimed it was not alone in its concern.

It said: “His time at CSX is best encapsulated by this anecdote: on the very day Jim Vena and Mark George were announcing the largest merger in industry history, he was promoting his involvement with the company’s internship programme on his tidily managed LinkedIn.”

Describing Mr Hinrichs’ tenure as “value-destructive”, Ancora said it expected CSX to be “far more proactive” and that Mr Angel would find a “willing partner to merge with”.

It appeared Ancora was also indicating it was looking for more top-level departures, adding it “anticipates Mr Angel will evaluate the full leadership team in order to restore the operational excellence that was a key tenet of CSX’s past success”.

It said: “This should be a cautionary tale for all corporate leaders who consider putting their own agenda ahead of shareholders’ best interests.”

For the industry at large, the CSX board’s decision to replace Mr Hinrichs with someone with expertise outside the rail sector, but very much with an M&A pedigree, indicates the railroad’s direction of travel, much to the consternation of employees – and possibly customers.

After news broke of the $85bn Union Pacific-Norfolk Southern tie-up, unions requested the US Surface Transportation Board provide “complete transparency” in its review of the deal.

The IAM Union rail division warned that the deal, while promising to “reshape the freight rail landscape”, also provoked “serious concerns about community safety, job security/workers’ rights, competition and long-term industry stability”.

And sources familiar with the deal told The Loadstar that if approved it marked a worrying shift and the potential for uncompetitive practices at the expense of railfreight users.

Those concerns were compounded by the news that STB board member Robert Primus had been sacked via a two-sentence email delivered  just hours after attending an event to mark a new Amtrak development.

Objecting to the email’s assertion that he was “not in line with America First,” Mr Primus told CNBC “I’ve been pro-growth, pro-America since I’ve been here”.

However, sources told The Loadstar that, with the $85bn Norfolk Southern-Union Pacific tie-up hanging over the STB at present, the ousted board member’s past expressions of concern about rail freight mega-mergers may have been the driving factor in his dismissal.

As far as Mr Angel is concerned, CSX was keen to play up how mergers he has been involved in benefited the companies’ investors.

The release confirming his appointment noted that, after the merger of industrial gas firms Linde and Praxair, which Mr Angel oversaw, the combined entity’s market capitalisation grew by $131bn, or 141%, making it the “world’s largest industrial gases and engineering company”.

CSX chair John Zillmer said: “[Mr Angel] is a visionary in creating long-term value and an expert in guiding companies through significant transformation.

“The board is laser-focused on advancing CSX’s strategic priorities and maximising shareholder value, and we are confident Steve has the right skillset, expertise, and background to help us deliver our next phase of growth.”