Activist investor firm’s bid to take over Norfolk Southern gains steam

Ancora wants to replace the Atlanta-based railroad’s CEO, and it has gained some support from unions at Norfolk Southern
The Norfolk Southern logo is prominently displayed on the company's headquarters in Atlanta, as viewed from W. Peachtree Street NE on Tuesday, April 4, 2023.
 Miguel Martinez /

Credit: Miguel Martinez

Credit: Miguel Martinez

The Norfolk Southern logo is prominently displayed on the company's headquarters in Atlanta, as viewed from W. Peachtree Street NE on Tuesday, April 4, 2023. Miguel Martinez /

An activist investor campaign to gain control of Atlanta-based Norfolk Southern has won some support from unions and others as a crucial Thursday shareholder vote approaches.

Ancora Holdings Group, the activist investor firm, wants to replace a majority of Norfolk Southern’s board members and its CEO, Alan Shaw. Ancora also wants former UPS executive Jim Barber as the CEO of the Atlanta-based railroad, and wants to install a former CSX executive as chief operating officer.

On Thursday, shareholders will decide the fate of Norfolk Southern’s leadership at the company’s virtual annual meeting.

Since the February 2023 fiery derailment in East Palestine, Ohio, of a Norfolk Southern train carrying hazardous materials, the railroad has been beleaguered by public criticism and well over $1 billion in charges related to the wreck. Last month, the company reported a steep decline in first quarter profit, after tallying hundreds of millions of dollars of expenses in the fallout from the derailment.

Norfolk Southern management and Ancora and its allies have bombarded investors and analysts with last minute appeals for support, turning this into a sort of corporate version of a presidential campaign. And like an unpredictable election season, there’s already been an October surprise.

A major union that represents some of Norfolk Southern’s workforce, the Brotherhood of Locomotive Engineers and Trainmen (BLET) division of the Teamsters union, has switched allegiance from management to Ancora.

In February, after Ohio-based Ancora launched its takeover bid, BLET’s general chairmen called Ancora’s proposal “reckless,” “bad for investors” and “likely to lead to more train wrecks.”

FILE - Norfolk Southern locomotives are moved through the Conway Terminal in Conway, Pa., June 17, 2023. The activist investors trying to take control of Norfolk Southern's board are picking up key support, but the railroad's CEO promised Monday, April 29, 2024, to continue fighting until the May 9 vote because he believes his strategy is the best in the long run for investors, customers and workers. (AP Photo/Gene J. Puskar, File)

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Credit: AP

But in late April, Ancora announced it had won the support of BLET, along with the Brotherhood of Maintenance of Way Employees Division of the Teamsters. Together, the two labor groups make up about half of the unionized workers at Norfolk Southern, according to Ancora.

Norfolk Southern had roughly 20,000 employees, and about 80% of them are unionized.

Another major union at Norfolk Southern, the International Association of Sheet Metal, Air, Rail and Transportation Workers Transportation Division (SMART-TD), is opposed to a takeover by Ancora and accused BLET of “deciding to buy in with a hedge fund.”

SMART-TD contends the BLET union, by reaching a memorandum of understanding with Ancora to get better work rules, severance, representation on committees and other terms, “decided to sell out to catch up.”

The AFL-CIO has also urged Norfolk Southern shareholders to reject Ancora’s takeover, which it said could derail safety and service improvements underway.

‘Down to the studs’

The support of some, but not all, unions at Norfolk Southern comes after Jamie Boychuk, the former CSX executive who Ancora wants to install as COO of Norfolk Southern, said during a town hall for shareholders: “Norfolk Southern has good bones, structure. It just needs to be stripped down to the studs and we need to rebuild this thing.”

A major Norfolk Southern customer, steelmaker Cleveland-Cliffs, has also announced support for Ancora. Other customers have voiced support of Shaw and current management.

While unions and customers of Norfolk Southern are not necessarily shareholders that vote on the matter, Jason Seidl, an analyst with investment bank TD Cowen, wrote in a note to investors that their support of Ancora “has the potential to influence the shareholder vote.”

Norfolk Southern has mounted a vigorous defense and rolled out some of its own reforms, including the replacement of its chief operating officer with John Orr, who was Canadian Pacific Kansas City’s (CPKC) chief transformation officer.

The appointment of Orr as COO cost Norfolk Southern $35 million, a recent filing said. That includes $25 million Norfolk Southern previously said it had agreed to pay CPKC for a waiver of Orr’s noncompete provisions and other “financial and commercial considerations.”

The company is also on a path to reduce its total head count by 2% by the end of the year.

Beyond the unions and investment community, others have spoken out. In published remarks last week, the retiring chairman of the Surface Transportation Board, the economic regulator of the railroads, warned of “serious concerns” about Ancora’s plans.

“There is little doubt in my mind that if Ancora succeeds in taking control of NS and strips it down as it promises, service will suffer a significant deterioration,” said Martin Oberman, who is stepping down from his role later this month.

In recent days, shareholder advisory firms have lent their support to at least some of Ancora’s proposed board members.

Advisory firm Egan-Jones recommended that shareholders vote for all seven of Ancora’s board nominees, saying the East Palestine tragedy and other derailments “demonstrate the lack of adequate operational plans for emergency operations that led to value destruction and loss of public confidence and trust.”

Glass Lewis, another shareholder advisory group, said “Ancora has publicly laid out a fairly detailed, three-year plan” focused on precision scheduled railroading principles, to cut costs and increase efficiency, improve safety and service. It said “Ancora has presented a compelling case for supporting a substantial overhaul” of Norfolk Southern’s leadership, and supported six of Ancora’s seven nominees to the 13-member board.

Institutional Shareholder Services, another advisory firm, recommended shareholders support five of Ancora’s seven nominees, but did not support the replacement of Shaw, the CEO.

“Although there is a clear case for change, (Norfolk Southern) is not a broken company, and operational performance does not reflect a situation so dire as to suggest that a change in board control and an accompanying overhaul of strategy and leadership is immediately required,” ISS wrote in its report.

Norfolk Southern CEO Alan Shaw speaks during an interview at the Norfolk Southern Headquarters in Atlanta on Tuesday, April 4, 2023. (Miguel Martinez/The Atlanta Journal-Constitution/TNS)

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Credit: TNS

Norfolk Southern called ISS’s recommendation “a clear endorsement of the company’s management and strategy,” noting that it supports a majority of Norfolk Southern’s board nominees.

“ISS’s recommendation against (Ancora CEO candidate) Jim Barber is a clear indication that a change in management is not warranted, and further, adding him to the board may create an unfavorable dynamic in the boardroom that would impede the Company’s progress and momentum,” Norfolk Southern said in a statement last week.

Meanwhile, Norfolk Southern and Ancora have inundated shareholders with filings advocating for their respective strategies and asking for shareholders’ votes ahead at the railroad’s annual meeting.

Norfolk Southern disclosed that it recorded $21 million in costs associated with shareholder advisory matters in the first quarter.