TCI Fund hires adviser ahead of possible CN proxy fight

TCI Fund Management Ltd. has retained Kingsdale Advisors to act as strategic adviser and engage with CN's shareholders to achieve TCI's objectives of halting CN's pursuit of Kansas City Southern and upgrading its board.

One of CN's largest shareholders, TCI will pursue new board members who, among other things, will have a mandate to identify and appoint a new chief executive officer of CN, TCI officials said in a press release.

Kingsdale will lead TCI's campaign in the event a proxy fight is necessary, they said.

"We believe CN's best days are ahead of it, provided the company immediately withdraws from its reckless, irresponsible, and value destructive pursuit of KCS," said Chris Hohn, TCI's founder and portfolio manager. "The 'copy-cat' bid for KCS, combined with CN's continued operational underperformance, make the case for change compelling and clear."

TCI, through entities it manages, has been a shareholder of CN since 2018 and currently owns more than 5% of the shares outstanding, valued at $4 billion.

Hohn has criticized CN leadership for "misjudging" the Surface Transportation Board, which last week ruled against CN's proposed use of a voting trust as part of its plan to acquire KCS.

"The [CN] board now lacks all credibility so new directors must be appointed that have more railroad experience and expertise. The CEO should also be replaced with a railroader that has a proven track record in order to create a much-needed culture of operational excellence," Hohn said in the release.

"Due to the urgency of these issues, we expect to requisition a special meeting of CN shareholders soon to nominate at least five new directors with a mandate to lead the board in the process of selecting a new world class CEO with extensive experience of railroad operations to turn CN around. We believe the majority of CN shareholders share our vision and will support the actions and leadership changes we are recommending,” he added.

CN and KCS did not respond to requests for comment on TCI's announcement.