U.K. marketResistance to a U.K. hedge fund's effort to control CSX
Ever since the 2006 Dubai Ports World’s takeover of management operations in major U.S. seaports, Congress has shown increasing irritation with attempts by foreign companies to own U.S. critical infrastructure assets; there is a growing resistance in Congress to U.K.-based TCI to take control of rail operator CSX
The touchy subject of foreign ownership of U.S. critical infrastructure assets is here again: The chairwoman of the House subcommittee with jurisdiction over the rail industry said Congress should intervene if necessary to prevent too much foreign control of U.S. rail infrastructure. Representative Corrine Brown (D-Florida) chaired a hearing yesterday of the Railroads, Pipelines and Hazardous Materials Subcommittee to scrutinize attempts by the London-based Children’s Investment Fund to force changes to the management of CSX Corp. (CSX). Do not be lulled by the innocuous-sounding name Children’s Investment Fund: In fact, the Children’s Investment Fund Management (TCI) is a hedge fund founded by sharp-eyed Chris Hohn in 2003. TCI manages the Children’s Investment Master Fund. TCI makes long-term investments in companies globally. The management company is authorized and regulated by the U.K. Financial Services Authority. A portion of TCI’s profits go to the Children’s Investment Fund Foundation, a nonprofit organization focused on improving the lives of children living in poverty in developing countries. TCI derives its name from its annual donations to a foundation called he Children’s Investment Fund Foundation (CIFF), which is run by Hohn’s wife, Jamie Cooper-Hohn, and which has become one of Great Britain’s largest charities. Chris Hohn, by the way, regularly makes it to the Trader Monthly 100 list, which lists the 100 most successful U.K. traders every year. In 2006, the last time we checked, you needed to have made $50 million just to gain admission to the list; you needed $1 billion in annual comp to crack the Top 5. Hohn was No. 21.
Back to CSX. “Congress has acted to prevent foreign companies from managing U.S. port operations and owning U.S. Airlines because they wanted to protect our countries’ infrastructure from harm,” Brown said in a statement. “The nation’s freight railroads are just as critical, and if damaged, could cripple the nation if placed in the hands of unknown foreign ownership or short sighted investors.” Brown told Dow Jones Newswires’ Martin Vaughan that the U.S. rail infrastructure is used to transport military equipment to ports to support U.S. military operations overseas. “Our freight moves our military. Do we want foreign hands controlling it?” she asked. Brown said investment in rail infrastructure should be given a higher degree of scrutiny than other types of foreign investment because it provides critical public benefits and was established by governmental mandate.
The U.K.-based Children’s Investment Fund has a 4.2 percent stake in CSX, the third- largest U.S. railroad operator. CSX has enlisted congressional allies like Brown — who represents the Jacksonville, Florida district where the company is headquartered — to fight an aggressive push by the hedge fund for changes to the CSX management structure, and a heftier presence on its board of directors. Brown said the hearing is “step one” in what she hopes will lead to more oversight of TCF’s involvement by other congressional committees, and the Bush administration.
