CSX has a new CEO.
The Jacksonville, Fla.-based railroad in a release said it has agreed to a deal with hedge fund Mantle Ridge LP to name E. Hunter Harrison as chief executive, effective imediately, and to nominate people for five seats on its board.
The agreement comes after a report March 3 that the sides were nearing a deal but still negotiating terms.
Harrison, 72, a past Railway Age Railroader of the Year who presided over a radical revamping of Canadian Pacific, will get a four-year contract. Harrison, Mantle Ridge founder Paul Hilal, and three others were appointed to the CSX board. The hedge fund had earlier sought six seats.
Investors flocked to CSX shares when news of Harrison’s interest first broke, adding $10 billion in equity to CSX in a matter of weeks.
But some industry observers questioned whether CSX, while far from a basket case, was really in need of an intensive makeover.
On Feb. 21, CSX announced that Chairman and Chief Executive Officer Michael Ward and President Clarence Gooden will retire, effective May 31. The company at the same time announced that its was eliminating 1,000 management positions. In addition, 800 CSX employees have accepted voluntary buyout/retirement packages. Wityh the hiring of Harrison, Ward will become a consultant to the railroad, also effective immediately.
CSX initially balked at the Mantle Ridge proposal, which called for a total compensation package for Harrison of more than $300 million, including $84 million to reimburse Mantle Ridge for buying out Harrison's severance with Canadian Pacific, and a stock option equal to 1% of CSX common stock, at the time valued at $159.5 million.
In addition to Harrison and Hilal, CSX said that Dennis Reilley, Linda Reifler and John Zillmer were named to the board of directors.It added three incumbent CSX directors intend to complete their service at or before the conclusion of the 2017 annual meeting, bringing the board to 13 members. CSX’s current Presiding Director, Edward J. Kelly III, will become Chairman of the Board and Hilal will become Vice Chairman.
Reilley is Chief Executive of Praxair, a provider of industrial gases. Riefler is a director of financial analyst MSCI Inc.; Zillmer is an adviser with CVC Capital Partners.
The agreement was reported by The Wall Street Journal on Monday.