TCI opens proxy fight with CN to oust CEO after Kansas City Southern merger flop

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Kansas City Southern backed out of its merger agreement with CN rail and plans to accept CP rail’s US$27 billion offer

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One of Canadian National Railway Co.’s largest shareholders formally started a proxy fight to replace the company’s leader and some board members, arguing that their failed attempt to buy Kansas City Southern for US$30 billion demonstrated “flawed decision making.”

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TCI Fund Management Ltd., the London-based investment manager that owns a five per cent stake in CN and opposed the proposed deal, on Monday identified a former chief operating officer of Union Pacific Corp., Jim Vena, as a candidate for chief executive officer. It also recommended four board nominees “who will provide the deep railroad operational experience the current Board lacks,” TCI said in a statement.

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The independent nominees include Gilbert Lamphere, the current chairman of MidRail Corporation, and Rob Knight, a former chief financial officer of Union Pacific. The others are Allison Landry, a former equity analyst at Credit Suisse and a director at XPO Logistics Inc., and Paul Miller, a former CN vice president.

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“The Board consistently misjudged the STB and displayed flawed decision making, committing billions of dollars to an ill-conceived pursuit of an unattainable asset,” Chris Hohn, TCI’s founder and managing partner, said in a statement, referring to the U.S.’s Surface Transportation Board.

Last month, the agency rejected CN’s plan to use a voting trust to make the purchase, as Kansas City Southern had demanded as a means to immediately pay out shareholders. TCI said in its statement that CN should focus getting better rather than bigger, without elaborating.

TCI is also proposing to remove four CN directors including Robert Pace, Kevin Lynch, James O’Connor and Laura Stein. A representative for the company wasn’t immediately available for comment.

CN has been locked in a months-long bidding war with smaller rival Canadian Pacific Railway Ltd to acquire Kansas City Southern. The U.S. rail operator said Sunday that it’s backing out of its merger agreement with CN and plans to accept CP’s US$27 billion offer, which has a better chance of gaining the approval of regulators.

Bloomberg.com

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