Odds Of Hunter Harrison/Mantle Ridge Making A Successful Assault On CSX Have Increased

CSX Corporation CSX was initially expected to “put up more of a fight” against activism, and the probability of Hunter Harrison/Mantle Ridge making a successful assault on the company has increased, Aegis Capital’s Jeffrey Kauffman said in a report.

Kauffman maintains a Hold rating on the company, while raising the price target to $50.

What Is Different This Time?

Hunter had approached CSX twice in the past — in 2014 and 2015 — but had been rejected. Kauffman noted that the previous moves involved merger discussions between Canadian Pacific Railway Limited (USA) CP and CSX, while the current approach involves only a management change.

“While we still believe the endgame here is to effect a combination between CSX and CP, we get the sense that because of the lack of a staggered Board of Directors, CSX would face a difficult road ahead if Mantle Ridge was to offer a new candidate list by the February 10th deadline, and we believe that the two sides are already in discussions,” the analyst commented.

The price target has been raised to reflect the increased odds of an activist change as well as expectations of an “accelerated EPS ramp” to $4.00 by 2020, Kauffman mentioned.