Ancora letter to CSX Board of Directors makes its case for CSX to explore merger options

Earlier this month, activist investor Ancora Holdings LLC penned a letter to the Board of Directors at Jacksonville-based Class I railroad carrier CSX, in which it stated that CSX CEO Joe Hinrichs has put the company in the position of having to play “catch up,” following the recently-announced merger between Union Pacific (UP) and Norfolk Southern (NS).

This development was initially reported by the Wall Street Journal. 

“We are writing to you today to ensure that you understand the current consensus among investors: the Board needs to announce in the near term that it is working with identified third-party advisors to explore a range of merger options,” wrote Ancora. “Time is of the essence because inaction risks impairing the long-term value of CSX. Once Norfolk Southern and Union Pacific start operating as a unified transcontinental railroad, no railroad has more to lose than CSX.”

To that end, Ancora highlighted what it viewed as “missteps” for CSX under Hinrichs’ leadership, including: anemic shareholder returns in the single-digits, compared to billions of dollars in value generated by his predecessors from 2025 through early 2022; disastrous operational performance, with an increase in operating ratio, from 58% when Hinrichs joined CSX in 2022, to around 67% year-to-date in 2025; poor personnel selection, calling CSX COO Mike Cory “a mediocre operator, saying the CSX Chief Commercial Officer [Kevin Boone] has failed to achieve any material improvements in carload growth; and blown opportunities, with Ancora saying it suspects Hinrichs was reluctant to engage in substantive discussions related to opportunities pertaining to a transcontinental railroad, as he would have no role at a combined railroad.

What’s more, Ancora outlined next steps it would like to see CSX take, including retaining a bank to explore transaction opportunities with BNSF Railway and Canadian Pacific Kansas City, in order to explore all opportunities for maximizing shareholder value.

“The reality is that BNSF is a cash buyer that would bring a highly disciplined approach to any negotiations, rendering CSX in a vulnerable position if it does not have alternative parties to speak with,” said Ancora. “We believe CPKC, under the leadership of Keith Creel, represents a compelling partner for CSX, as it looks to compete in a new railroading environment. Although one could suggest that the U.S. government could have difficulty approving an acquisition by a Canadian railroad, a transaction could be structured as a reverse merger under which CSX acquires CPKC. Regardless, because of the importance of time here and moving quickly, engaging with CPKC may be the best way to create competitive tension that accelerates a path to an excellent deal.”

When asked for a comment on this by LM, a CSX official said it maintains its current stance, as it relates to shareholder value.

“We’ve said it before, and we’ll say it again: CSX welcomes all opportunities for us to enhance value for our shareholders,” he said. “CSX appreciates the input of its shareholders and engages regularly with them as it executes on its goals to drive value through profitable growth and industry leading customer service.”

And on the company’s recent second quarter earnings call, CSX CEO Hinrichs said that there has been a lot of rumor and speculation about consolidation in the railroad industry in recent weeks.

“While we cannot comment, we want to be clear that at CSX, we are absolutely focused on delivering shareholder value and are always open to anything that can help us achieve this objective,” he said. “We have a strong franchise that we believe is the best in the east, and we are making it stronger every day. Our customer service is industry-leading, we have exceptionally strong relationships with those customers. We are working closely with numerous partners to help accelerate the build-out of industrial capacity on our network. And our commercial team is actively developing new solutions that will help us expand our reach and gain share. We are driving forward with major network projects that will prove to be valuable investments.”

Hinrichs also said that while CSX is not going to speculate or talk about any kind of merger or anything of that kind, he did state that customers are looking for railroads to provide better service, more reliable, dependable, repeatable, and also looking for us to be easier to do business with. 

While CSX would not directly address any potential merger activity, a late July Bloomberg report stated that CSX is working with investment bank Goldman Sachs to explore strategic options.

This is not Ancora’s first foray into the freight railroad space. Last year, it engaged in a proxy bout and attempted management takeover of Norfolk Southern, which resulted in three director nominees whom were proposed by Ancora were elected to the NS board, including: William Clyburn, Jr., former commissioner and vice-chairman of the U.S. Surface Transportation Board, Sameh Fahmy, former EVP of precision scheduled railroading at Kansas City Southern, and Gilbert Lamphere, chairman of MidRail Corporation and co-founder of MidSouth Rail Corporation.

As previously reported tensions were running high in advance of the May 2024 NS shareholder meeting, with Ancora maintaining that NS is not committed to fully implementing Precision Scheduled Railroading (PSR), created by the late CSX President and CEO E. Hunter Harrison, whom passed away in December 2017. 

In looking at the current state of M&A activity within the freight railroad sector, an industry stakeholder observed that there are reasons for shippers to be concerned about both the UP-NS deal, as well as any potential future deals, too.

“My guess is these types of deals are not going to result in lower costs,” he said. “It may have some impact on rates, but I don't think in the short term, pricing is going to matter. There's probably some kind of service disruption, because there always seems to be. When you have a merger, it is end-to-end. There really shouldn't be any kind of material service disruption, so I don't think that should be a concern. The market power is going to be substantially greater but not for everybody.”