Ancora's activist strategy: Why the firm is targeting Norfolk Southern

Leslie picker she's bringing us a special interview on an activist campaign against railroad operator norick Southern so only two of us today Leslie we welcome your participation well thank you Joe I appreciate that um and I appreciate your time James Chadwick uh for a CNBC exclusive Jim is the president of Alternatives at Anora The Firm has taken an aggressive activist stance in northl Southern and is releasing its management strategy this morning which includes changes in the CEO spot and the

board good morning Mr Chadwick um so you've got a deck that you plan to circul circulate to investors you've got a website here uh a majority of the Slate you're nominating eight directors and we'll have uh some full screens that show who those directors are and you are recommending Jim Barber the former COO of UPS is the CEO of norfol Southern uh and you put a $420 price Target that's pretty significant upside uh more than 2third of where the shares are currently trading so why this slate why a

change in management and why do you think that they can affu the kind of value creation that gets to 420 a share for norfol thanks for having me today I lesle we really appreciate it look as an Ohio base manager you know we're deeply invested in this in this company it's beyond just dollars and cents I mean for us this is uh you know this is something that's in our own backyard and I'm referring of course to the East Palestine derailment last year I think before getting into the the some of the

specifics on the question just to step back at 30,000 ft um you know what we want to outline here and what we believe is outlined in the deck is the case for change at norrick Southern and why it's so strong you know why we think that we can offer shareholders really an un unmatched value proposition here and I think there are some key points we want to bring up you know you know first Nori Southern's the the worst performing operator in the class one railroad space and that's measured based on

the operating metrics the share price performance and and that's despite having you know an exceptional Workforce a great customer base you know really all the that would be needed to to to uh to be a top performing railroad you know but unfortunately you know the the company's been in our opinion mismanaged and and the boort has made some poor poor decisions secondly you know when you look back in in 2022 the company had the opportunity to bring in a what we think would could have been a real

operator to turn around the business to you know and instead they elevated a a 30-year company Insider with real no no real operational Acumen that really has never even generated growth even formerly as a company's CMO and then third I think you know the consequences of poor execution and weak management were epitomized by the East East Palestine derailment um and even to this day you know since that time the companies had continued accidents um they had a tragic death of an engineer in the las

t couple weeks as well as multiple derailments in the past 30 days but I think when you mentioned that that what we think we can bring to the table here how we're going to drive value I mean first you know you look at the Slate we put together we've nominated eight directors as as you had said and we think all of them are exceptionally strong and that includes Governor uh John Kasich you know regulatory experts like William klyburn rail experts like Gil lampier and Sammy famy um the management t

eam we think that we're proposing here is outstanding Jim Barber you know we think he's a superstar former coo at uh at UPS as as well as as well as Jamie Boychuk who's who's really one of the highest regarded rail operators in the country and so combining those two with Jamie as as as the uh as the COO candidate but combining those two really marrying those perspectives between those two individuals you marrying UPS kind of best practices with rail principles we think that we can drive signific

ant value here to the to the company Jim of course activism in railroads is a well-traveled line so to speak but two of the high-profile success stories from a disident standpoint Canadian Pacific and CSX they involved Hunter Harrison who is a renowned industry vet known for really uh inventing and and Priti Precision scheduled railroading and that's a piece of your push too even though norol Southern has implemented some key pieces of PSR but critics will say that it's you know not the best in

terms of safety standards um it lacks the same safety rigor and it can result in sizable layoffs so as you look at kind of the inefficiencies that you're trying to kind of solve for here you know how do you how do you square those two things especially as you mentioned you know we just reached the one-year anniversary of uh the East Palestine derailment well I think for openers I think the East Palestine derailment wasn't the result of PSR I mean what what nor fork Southern runs today and and th

e way that the railroads managed I mean poor safety in in my opinion is the function of poor leadership um so I think when you're looking back historically at what has happened in the other rails that have implemented PSR strategies we think obviously there's been some very notable successes I think the most recent of which you know pointing to Hunter and with CSX in 2017 I think part of the the challenge there as as he went through implementing that strategy was the timeline he was pushing for

was trying to make it happen very fast and I think part of it had to do with his health at that time um when I look at what we're trying to do here you know and you'll see in the presentation this is not PSR in in in the true sense of the word u you know we look at it as we we we build on the principles of scheduled railroading but really is we we've called it a you know a scheduled Network or a network of the future which we plan to detail a lot more about that plan in coming uh in coming weeks

but effectively it's it's it's taking the core principles of scheduled railroading but layering on top of those other components related and that's where I mentioned barbar's Network background but really driving growth marrying really the operating and and marketing functions of a company um and and and focused on on on the merchandise and and what you're actually pushing through on on your network but um like I said I I I am excited about the opportunity to uh to share more of those details a

s we as we go forward here and and and as Jim and and Jamie get a chance to uh to speak here what's currently your sticking point uh with the company at this at this stage based on their statements it seems like they've been engaging uh you know in discussions so you know where is kind of the Line in the Sand for each side at this point that would preclude some sort of a settlement it's Alan Shaw I think is is what I would say at this point I mean he's the company has been uh what I would descri

be as blindly loyal to him and in terms of their support despite his performance like I said the company's the worst performing railroad it's pretty much worse on every operating metric we could talk about since he's taken over as CEO um I think the view on their side is one of time and our view is the results speak fors and disasters speak for themselves and and and there has to be accountability um but really I think when you look at what's the sticking point you know this company has has an e

arly nominating window we had nominated in the last week of November uh so it's been you know over two and a half months of Engagement with the company we have engaged with them uh frequently and and have had quite a bit of communication but there really has been no movement either on the island sh front or on a real serious offer in terms of re of reconstituting their board and so both of those things we believe are necessary here I think to drive the type of value that the shareholders deserve