Norfolk Southern fires back at activist Ancora as proxy fight intensifies

By James Rogers

Norfolk Southern has slammed the 'flawed assumptions' of Ancora's 'highly unrealistic near-term financial targets' for the company

Norfolk Southern Corp. has fired back at activist investor Ancora Holdings Group amid the intensifying proxy fight over the railroad operator.

In a presentation filed with the Securities and Exchange Commission Friday, Norfolk Southern (NSC) slammed the "flawed assumptions" of Ancora's "highly unrealistic near-term financial targets" for the company.

"Among many other claims, Ancora grossly overestimates the 12-month savings across numerous categories and their 'estimated savings' are simply not supported by the mathematical reality," Norfolk Southern said in a statement. "Ancora has unrealistically projected expected savings of $800 million over 12 months, resulting in a 62%-63% operating ratio, while claiming they would not furlough employees."

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

Norfolk Southern also urged shareholders to vote only for the company's 13 nominees ahead of the company's annual shareholder meeting, which will be held virtually on May 9.

Earlier this year, Ancora launched a takeover bid for Norfolk Southern, which the railroad operator has urged its shareholders to reject. On Monday, Ancora issued a presentation "on the urgent need for leadership, safety and strategy changes" at Norfolk Southern. The presentation includes a three-phase strategy for reducing Norfolk Southern's operating ratio and increasing shareholder value, according to Ancora, which holds a large equity stake in the company.

"If the Board actually reviewed our 193-page presentation, it would have seen all the details in our nominees' plan and the intended outcomes that purportedly do not exist," a spokesperson for Ancora told MarketWatch. "Rather than making blanket statements that are nothing more than generalities, the Board should begin to consider what shareholders and the investment community think."

Last month Edgepoint Investment Group, which holds a $960 million stake in Norfolk Southern, said it is "fully supportive" of Ancora's efforts "for meaningful dialogue" with Norfolk Southern. Ancora has also received the support of Norfolk Southern investor Neuberger Berman.

Related: Norfolk Southern urges shareholders to reject activist investor's takeover plan

"We have yet to find one investor that is planning to vote in favor of the current management, which reflects long-run frustration with NSC's operating track record," Deutsche Bank analyst Amit Mehrotra wrote in a note released Monday. "We suspect the company is receiving the same feedback, which makes a last minute settlement/agreement the most likely outcome, in our view."

Ancora also hosted a town hall for Norfolk Southern shareholders Thursday in New York City, where, RBC Capital Markets analyst Walter Spracklin wrote in a note released Friday, it "made a compelling case."

Related: Norfolk Southern alone should pay for cleanup of Ohio train derailment, judge says

Norfolk Southern shares, which have risen 1.7% in 2024, ended Thursday's session up 0.4%. The stock is up 0.7% Friday.

Earlier this month, Norfolk Southern 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.

Norfolk Southern, which reports first-quarter results on April 24, has said that its second-quarter revenue will be impacted by the collapse of the Francis Scott Key Bridge in Baltimore.

-James Rogers

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04-19-24 1038ET

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