Ancora adds pressure on CSX to pursue a merger - report

[CSX Locomotive in Philadelphia]

Pressure continues to build on CSX (NASDAQ:CSX [https://seekingalpha.com/symbol/CSX]) to pursue a merger as Ancora Holdings indicates it could initiate a proxy fight if management declines to seek a tie-up with a competitor.

The hedge fund currently owns a $100M stake in CSX (NASDAQ:CSX [https://seekingalpha.com/symbol/CSX]).

In its letter to the CSX (NASDAQ:CSX [https://seekingalpha.com/symbol/CSX]) board, Ancora is pushing for a deal with another railroad operator in order to effectively compete with a combined Union Pacific (UNP [https://seekingalpha.com/symbol/UNP]) and Norfolk Southern (NSC [https://seekingalpha.com/symbol/NSC]).

“Time is of the essence because inaction risks impairing the long-term value of CSX,” Ancora’s letter states.

Ancora is pressuring CSX (NASDAQ:CSX [https://seekingalpha.com/symbol/CSX]) to explore a merger with either Berkshire Hathaway-owned BNSF or Canadian Pacific Kansas City Southern (CP [https://seekingalpha.com/symbol/CP]) and kick-start the process by engaging an investment bank. Failing that, the activist investor is prepared to mount a proxy fight for board seats with the ultimate aim of ousting CEO Joe Hinrichs.

The hedge fund believes CSX is in the "difficult position of playing catch-up" by not establishing a "fruitful dialogue with Union Pacific in the first half of 2025 when public momentum was buidling for a transcontinental railroad," calling this misstep "the type of mistake from an inexperienced and insecure CEO."

Ancora’s campaign comes at the same time another activist investor is looking to meet with CSX (CSX [https://seekingalpha.com/symbol/CSX]) management. Toms Capital, [https://seekingalpha.com/news/4487102-activist-toms-capital-seeks-meeting-with-csx-after-acquiring-stake-reuters]which recently acquired a 5.6M stake in the railroad operator, recently advocated for deals at U.S. Steel and Kellanova (K [https://seekingalpha.com/symbol/K]), according to Reuters.

On the heels of the proposed $250B tie-up of Norfolk Southern (NSC [https://seekingalpha.com/symbol/NSC]) and Union Pacific (UNP [https://seekingalpha.com/symbol/UNP]), CSX (CSX [https://seekingalpha.com/symbol/CSX]) reportedly hired [https://seekingalpha.com/news/4475902-csx-gains-on-report-its-working-with-goldman-to-explore-options] Goldman Sachs to explore strategic options.

“We’re open to any and all possibilities that create value for our shareholders, to help us profitably grow and serve our customers better,” CEO Hinrichs said in an interview with Bloomberg.

Activist interest in CSX (CSX [https://seekingalpha.com/symbol/CSX]) fueled a 17-month high in shares on Tuesday.

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