Skip to main content
Canada’s most-awarded newsroom for a reason
Enjoy unlimited digital access
$1.99
per week
for 24 weeks
Canada’s most-awarded newsroom for a reason
$1.99
per week
for 24 weeks
// //

A CN Rail locomotive moves through a rail yard in Dartmouth, N.S., on March 29, 2018.

Andrew Vaughan/The Canadian Press

Activist investor TCI Fund Management turned up the pressure on Canadian National Railway Co. on Monday, unveiling a slate of four people it wants to join the railway’s board in a meeting to be called “shortly.”

CN’s second-largest investor made the move one day after Kansas City Southern Railway terminated CN’s takeover agreement in favour of an offer from Canadian Pacific Railway Ltd.

“The business has been underperforming for too long, so change is required,” said British billionaire Chris Hohn, who leads TCI. “We did not seek a proxy fight, but without urgent action CN’s operational and financial performance will continue to lag its peers under a board that lacks the right railroad experience and operational expertise.”

Story continues below advertisement

CN acknowledged TCI’s press release but said it has yet to receive an official request for a shareholders’ meeting. “Once CN is in receipt of the requisition, it will review it and comment further in due course,” CN said on Monday.

In addition to chief executive officer Jean-Jacques Ruest, TCI targeted four CN directors for replacement: chairman Robert Pace, and directors Kevin Lynch, James O’Connor and Laura Stein.

TCI wants to install as CEO former CN executive Jim Vena, in addition to the following board members: railway veteran Gilbert Lamphere; Allison Landry, a banker and director of XPO Logistics Inc.; Rob Knight, former finance chief at Union Pacific Corp. railway; and Paul Miller, a former CN executive.

Mr. Vena was employed for 40 years by CN, working his way up from labourer to train engineer before departing as chief operating officer in 2016. He became operating chief of Union Pacific, the second-biggest railway in the United States, in 2019.

Mr. Vena transformed UP’s operations based on the cost-cutting operating model pioneered at CN and CP by past CEO Hunter Harrison before stepping back to become an adviser to the company chairman this year.

“We have assembled an independent, accomplished and world-class slate of director nominees,” Mr. Hohn said. “They all have had long and distinguished careers operating in and analyzing the railroad industry. They bring vast railroad experience and knowledge, and they also share a common and very achievable goal: to create a much-needed culture of operational excellence at CN, which is essential if the company is to reach its full potential.”

TCI owns more than 5 per cent of CN’s shares, worth about $4-billion. TCI is also the largest owner of CP shares, at 8 per cent.

Story continues below advertisement

TCI in 2008 teamed up with 3G Capital Partners to win a proxy fight at U.S. railway CSX Corp., replacing four of 12 directors.

KCS rejected CN’s US$29.8-billion takeover offer after the U.S. regulator, the Surface Transportation Board, blocked a key step in CN’s bid. The STB said the voting trust in which CN planned to hold KCS while awaiting STB approval of the takeover was not in the public interest. The regulator has already approved CP’s voting trust, a structure that protects the operating integrity of an economically important company while a deal is reviewed.

That made CP’s lower bid for KCS, worth US$27.2-billion, more attractive.

KCS’s board on Sunday declared CP’s offer “superior” and said it planned to terminate the CN agreement.

The CP takeover is subject to approval by the STB and Mexican regulators. However, the STB has already approved the voting trust, and has said the deal will receive less scrutiny given the smaller sizes of both CP and KCS.

CN, whose railway parallels that of KCS in the Southern U.S., pressed ahead with its offer despite a warning in May from the STB over the amount of debt it would take on to complete the deal. The U.S. Department of Justice in May also opposed CN’s voting trust.

Story continues below advertisement

“The bid for KCS exposed a basic misunderstanding of the railroad industry and regulatory environment,” Mr. Hohn said. “The board consistently misjudged the STB and displayed flawed decision-making, committing billions of dollars to an ill-conceived pursuit of an unattainable asset. CN should focus on getting better rather than bigger.”

Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies