Canadian National railway chief to step down amid pressure from Hohn’s TCI fund

Canadian National said on Tuesday that its chief executive Jean-Jacques Ruest will leave the company as soon as January, weeks after UK hedge fund manager Chris Hohn called for his resignation.

The Montreal-based railway group said Ruest’s departure was a planned retirement after just over three years in the role. But his exit comes as CN has been battling to keep investors on side and Ruest only last month announced a strategic plan called “Full Speed Ahead”. 

A campaign led by Hohn’s TCI hedge fund has been building steadily over the past five months in which the UK billionaire has sought to oust Ruest as well as several members of the company’s board.

“Nothing changes. We press on to the shareholder vote,” Hohn told the Financial Times after Ruest’s exit was announced.

Hohn’s disapproval of CN management stems from its failed attempt to buy Kansas City Southern in a deal that would have turned the combination into the third-largest railroad operator by revenue in North America.

CN gatecrashed an agreed takeover of KCS by its smaller rival Canadian Pacific with a $34bn deal, only to be forced to abandon it after a US railroad regulator rejected the way the transaction was structured. That paved the way for CP to return and strike a $31bn deal to buy KCS.

Robert Pace, CN chair, said in a statement that Ruest had deferred discussions on his retirement to see through the potential deal with KCS. “We are grateful for his leadership and his exemplary commitment of service to the company,” Pace said in a written statement.

Hohn’s TCI, which owns a more than 5 per cent stake in CN worth about $4.3bn, had put pressure on the company to drop its bid as early as May. The London-based hedge fund warned that the deal faced significant regulatory hurdles and a decision to create a voting trust “would be hugely value destructive”.

In a statement released on Tuesday, Hohn said Ruest’s departure “is a good start” but added that “it does not address the fundamental problem of a lack of leadership, failed strategic oversight, and the vacuum of operational expertise at the board level”. The fund has also reiterated a call for Pace’s resignation.

TCI added that it has already identified a suitable successor for Ruest, CN’s former chief operating officer Jim Vena. The Canadian-born executive retired from his post at CN in 2016 and later joined Union Pacific, the largest listed US railroad company, as chief operating officer and then senior adviser.

The hedge fund also urged the railway group to meet its four board nominees, saying their input in the search for a new chief should be welcomed “given the history of failed CEO appointments”.

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