CSX in talks to reach deal with activist, ex-CP CEO: source

By Michael Flaherty

(Reuters) - CSX Corp (NasdaqGS:CSX - News) is in early discussions with an activist investor over changes to its board and installing turnaround expert Hunter Harrison as the U.S. rail operator's CEO, according to a person familiar with the matter.

CSX executives met last Friday in Atlanta with the activist, Paul Hilal of Mantle Ridge LP, and Harrison, the outgoing chief executive of Canadian Pacific Railway Ltd (Toronto:CP.TO - News), to discuss an agreement, the person said.

CSX, Mantle Ridge and Harrison could not immediately be reached for comment.

The parties are discussing Mantle Ridge's request for more than three CSX board seats, but CSX is said to be unwilling to hand over that many seats, the Wall Street Journal reported on Sunday, citing people familiar with the matter.

Mantle Ridge is acquiring a large stake in CSX with the hope of installing Harrison to improve the company's performance, people familiar with the matter said last week.

Any push to quickly replace CSX CEO Michael Ward, who plans to retire in 2019, with Harrison would need to occur before the company's Feb. 10 deadline to nominate directors for the annual shareholder meeting in the spring. If the two sides fail to strike a deal, Hilal may be forced to launch a proxy fight by nominating a slate of directors who will support Harrison.

Harrison's track record of cutting operating costs and driving up profitability at the helm of CP and at Canadian National Railway Co (Toronto:CNR.TO - News) has helped CSX shares surge more than 30 percent since news of the Mantle Ridge plan surfaced.

Mantle Ridge has raised more than $1 billion for its CSX stake, Reuters reported earlier this month.

(Additional rporting by Abinaya Vijayaraghavan in Bengaluru; Editing by Gopakumar Warrier and Nick Zieminski)