The railroad company CSX is trying to head off the election of directors sponsored by one of its investors, a British hedge fund: CSX, hedge funds square off in forum (CNNMoney, June 9).
The Dubai Ports World debacle was triggered by a company - Ellis & Co. - that sought to exploit national security concerns in order to head off a business deal that it opposed ("So you're the little lady who started this big war.", The Custom House, February 28, 2006).
Now CSX is also trying to get an edge in its fight by exploiting national security concerns. Last week it was able to get six Senators to send a letter asking CFIUS for a probe (Railroad Deal: Sen. Menendez Wants Inquiry Into Foreign Acquisition of CSX ). Lou Dobbs has weighed in. Andrew Sorkin sounds disgusted: CSX Grasping at Straws to End Battle (New York Times, June 10). Barney Frank, however, D-MA and chair of the House Financial Services Committee, is not biting - but this article suggests - maybe unfairly -that this is for local and parochial reasons: ‘Why do I want to protect their right to screw my state?’: Frank (Jessica Holzer, The Hill, June 10).
Ron Orol considers whether or not the deal merits CFIUS review: CFIUS to take on British activist hedge fund? (TheDeal.com, June 9):
CFIUS practitioners argue that the TCI investment in CSX fits the bill for a CFIUS review. They say the railroad operator falls under the interagency's purview as critical infrastructure because it ships hundreds of carloads of nuclear waste and services military installations. TCI's activist efforts to replace five incumbent directors on the company's 12-member board at its June 25 annual meeting along with its large minority stake could be enough to trigger foreign control.
In practicality, though, this review would be unusual because neither CSX nor TCI have any plans to submit an application to CFIUS for review. Typically, when a foreign company buys a U.S. asset, both companies decide to voluntarily submit a joint application for approval. In this case, CFIUS might send out messages that it wants both companies to submit applications. Since CSX and TCI are opponents, both parties would likely provide separate documents explaining their opposition opinions.
For more posts on the CFIUS process: CFIUS.
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