CSX Issues Statement Regarding TCI Group Letter

JACKSONVILLE, Fla. — CSX Corp. the following statement in response to a letter sent by the TCI Group to the CSX Board of Directors, making three points:

  • “First, vote counts in contested elections always take time. The time period for this review is not unusual. The value of the process has been proved in the fact that the process has already identified errors in the preliminary report, which have been confirmed by the independent inspector of election. The review continues in good faith.”
  • “Second, the uncertainty in the vote count is significant enough to matter to the ultimate composition of the Board.”
  • “Third, the letter misstates the record in the litigation. The U.S. District Court did not flatly refuse to sterilize the votes. The U.S. District Court made clear that if the law were more certain, it would prevent the TCI Group’s voting of 6.4 percent of the outstanding shares of CSX. Recognizing the importance of the issues, the Appellate Court agreed to hear the appeal on an expedited basis. The one thing that was certain in the litigation is that the U.S. District Court found the TCI Group had violated the securities laws with respect to its activities in CSX stock. This finding compels the CSX Board to continue to proceed with diligence as it discharges its duties fully with respect to this election.”

CSX said it will proceed quickly and continue to keep open the lines of communication with respect to the status. Whatever the ultimate outcome, the CSX Board will work constructively to continue providing outstanding value for shareholders, the company said.

The Company also said that, in addition to the customary review and challenge period, the voting results are subject to the outcome of pending litigation between the Company and the TCI Group before the U.S. Court of Appeals for the Second Circuit.

TCI is a hedge fund that formed a group to nominate a slate of directors to stand for election at the 2008 CSX annual meeting.

In March, CSX filed a federal lawsuit against TCI and 3G Capital Partners, alleging violations of federal securities laws. CSX filed the lawsuit in the United States District Court for the Southern District of New York. CSX alleges TCI and 3G violated federal securities laws, including violations of the Securities Exchange Act of 1934.

TCI, which owns nearly 9 percent of CSX’s shares, said it wanted to control five of the board’s 12 seats.

— Wire Reports