More than a year after being ousted from the top job at Wisconsin Central Transportation Corp., Edward Burkhardt is launching a proxy fight that seeks to unseat the railroad’s entire board of directors, reinstate Burkhardt as chief executive–and sell off the company in pieces.
In preliminary proxy materials filed with the Securities and Exchange Commission, a group led by Burkhardt is asking Wisconsin Central stockholders to remove all nine current members of the board, and to replace them with a slate designated by Burkhardt’s group. If the replacement board is voted in, the 62-year-old Burkhardt would be named CEO, and the company would be put on the auction block.
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The group, which calls itself the Wisconsin Central Committee to Maximize Shareholder Value, currently holds a 7.2 percent ownership position in the Rosemont-based concern, principally composed of Burkhardt’s personal 7.14 percent holding.
The committee said it will seek to “position domestic operations for a strategic sale” to one of what it called “the developing mega-rail corporations” in the consolidating rail industry. The SEC filing specifically named Canadian National Railway Co., Norfolk Southern Corp. and CSX Transportation as potential buyers for the domestic Wisconsin Central operations.
It also said the company should divest its overseas holdings, which include minority stakes in railroads in Britain and elsewhere.
Wisconsin Central officials could not be reached for comment.
In Nasdaq trading, Wisconsin Central’s long-depressed shares (WCLX) inched up 12 cents to close at $10.75 per share.
The group faces some obstacles in pursuing its aims. For one thing, Wisconsin Central’s board is set up on a “staggered” basis, a standard corporate anti-takeover measure that allows only one-third of the board’s membership to come up for re-election in a given year.
Undeterred, the committee is asking shareholders to approve a bylaw change that will force the entire board to stand for re-election annually.
The brewing fight for control, which will be conducted by mail-in ballot, has some intriguing elements. Burkhardt, a veteran of the old Chicago & Northwestern, co-founded Wisconsin Central through a 1987 purchase of about 2,000 miles of Midwestern and Canadian track from Canada’s Soo Line.
The company went public in 1991 with Burkhardt as chairman, CEO and president. His reputation as an industry visionary made the company a Wall Street darling, for a time.
Later acquisitions in the Midwest helped make Wisconsin Central the nation’s biggest regional railroad. But Burkhardt’s real interest was in exploiting the global trend of governments selling off their national railroads to private investors.
To that end, the rail company was able to buy holdings in railroads in New Zealand, Australia and Great Britain.
But as investors began to lose enthusiasm for the costly international push, Wisconsin Central’s once highflying shares went into a decline in the late 1990s. In mid-1999, Burkhardt resigned under pressure from the board. He was succeeded as CEO by the company’s former chief financial officer, Thomas Power.
Despite periodic rumors that it might be a takeover target, Wisconsin Central has seen its share price slide since the management shakeup.
“It’s clear that the present board has no effective strategy in place to reverse this decline and to unlock the inherent value of Wisconsin Central for the benefit of its owners,” Burkhardt said.
Asked why he is seeking to shed the overseas investments that were the keystone of his earlier growth strategy, Burkhardt said the holdings were fundamentally sound, but that Wisconsin Central’s minority position has limited its ability to optimize the way the overseas operations are managed.
He denied any interest in purchasing those assets in the breakup sale his group proposes. “I’m not looking for work,” he laughed.