War of words over Norfolk Southern board battle intensifies as railroad slams activist Ancora's labor negotiation

By James Rogers

Activist investor Ancora Holdings is ramping up the pressure in its board battle with Norfolk Southern

A previous version of this story attributed a statement by Ancora to Norfolk Southern. The story has been updated.

The war of words in the board battle between Norfolk Southern Corp. and Ancora Holdings Group intensified Monday after the activist investor clinched the support of the Brotherhood of Locomotive Engineers and Trainmen Division of the International Brotherhood of Teamsters.

On Friday Ancora announced that its seven proposed candidates for Norfolk Southern's (NSC) 13-member board have received the support of the BLET Teamsters, which represents locomotive engineers, conductors, brakemen, firemen, switchmen, hostlers and other train-service employees at Norfolk Southern. In a statement, the labor union said that a change in leadership at Norfolk Southern "is necessary and in the best interest of both BLET members and the railroad's long-term success."

In a press release Monday, Norfolk Southern slammed what it described as "unauthorized, value-destructive commitments" by Ancora.

Related: Activist investor Ancora ramps up pressure in Norfolk Southern board battle

"Ancora, a shareholder in Norfolk Southern with no authority whatsoever to enter into any current or future binding agreement on behalf of the company, has negotiated and signed a memorandum of understanding with the BLET that commits its director nominees to future actions if they gain control of the board," Norfolk Southern said in a press release.

"Ancora's actions are a blatant attempt to buy votes through backdoor deals to take control of the company. This desperate effort by Ancora, if successful, provides concessions to the BLET that limit operational flexibility and destroy significant value for the company," the company said.

"Aside from violating the Railway Labor Act rules that grant exclusive negotiating authority to representatives of Norfolk Southern, Ancora has demonstrated that its own nominees are not independent and are beholden only to Ancora," Norfolk Southern added.

Norfolk Southern shares rose 0.4% Monday. The company's stock is up 1.9% in 2024, compared with the S&P 500 index's SPX gain of 7.2%.

Related: Norfolk Southern slams activist calling for CEO's firing following train derailment

Norfolk Southern and Ancora, which holds a large equity stake in the company, have been trading barbs ahead of the Class I railroad company's annual meeting on May 9. Earlier this year, Ancora launched its bid to take control of the company's board, which Norfolk Southern has urged its shareholders to reject. Ancora has also called for the firing of Norfolk Southern CEO Alan Shaw.

If elected, Ancora's new board members would seek to appoint Jim Barber, a former chief operating officer at United Parcel Service Inc. (UPS), as CEO of Norfolk Southern.

"The company's April 29th press release is exactly the type of stunt we predicted Mr. Shaw and his Board would pull when their support faded," Ancora said in a statement Monday. "We ask shareholders to recognize that current leadership is simply making meritless allegations to distract from its lack of a credible plan and its inability to retain stakeholder confidence."

Ancora also pointed to Cleveland-Cliffs, one of Norfolk Southern's largest customers, which placed its support behind the activist's board slate on Saturday.

"We're proud that our independent nominees could align with unions on non-binding concepts and non-binding principles for how underserved workers should be treated, especially in the wake of recent dangerous accidents," Ancora said in its statement. "Our nominees have displayed the constructiveness, experience and relationships that they will bring to the boardroom."

Related: Norfolk Southern says Baltimore bridge collapse's cost is more than $25 million per month

"At bottom, it's disingenuous for Mr. Shaw and his Board to chastise us for not having stakeholder support on one hand - and then lash out at us for appropriately obtaining support on the other hand," Ancora added.

Norfolk Southern declined to provide further comment beyond its press release when contacted by MarketWatch.

BLET believes in loyalty, "but not blind loyalty," the union's general chairmen, representing its members at Norfolk Southern, said in a statement released Monday afternoon. "The Norfolk Southern at the start of the proxy battle is not the same NS as today," they said. "NS's CEO Alan Shaw, who opposed PSR at the start of the battle, now appears to be a cheerleader for it."

PSR, or precision scheduled railroading, focuses on the movement of individual train cars rather than whole trains. A key railroad-industry trend of recent years, PSR aims to boost efficiency by streamlining operations. However, critics have questioned its effects on railroad safety.

Related: CSX 'solid and steady' despite Baltimore bridge collapse, say analysts

Last week Ancora gained the support of the Brotherhood of Maintenance of Way Employes Division of the International Brotherhood of Teamsters. Combined, the BMWED-IBT and the BLET Teamsters account for 41.5% of Norfolk Southern's workforce.

On Monday, Ancora also announced the support of independent proxy advisory firm Glass Lewis. In a press release, Glass Lewis said there is a "compelling case for supporting a substantial overhaul of the company's leadership."

Related: One year after Norfolk Southern's East Palestine derailment, rail safety is still in the spotlight

Norfolk Southern recently said it has reached an agreement in principle to settle a class-action lawsuit brought after last year's derailment of one of the company's trains in East Palestine, Ohio.

Last week Norfolk Southern confirmed that its first-quarter results were in line with its preliminary results released earlier this month. The company also said that the impact of the Francis Scott Key bridge collapse in Baltimore is in the range of $25 million to $35 million per month.

-James Rogers

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04-29-24 1442ET

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