Finance

1

InstitutionAffiliation

CSXCorporation v. TCI and 3G Fund

TCIand 3G fund acquired the CSX Corporation shares in an attempt to gainownership of the company. TCI entered into a cash-settled totalreturn swaps so as to avoid reporting a more than 5% stock ownershipin CSX Corporation [ CITATION CSX08 l 1033 ].

CSXCorporation had the largest operations dealing with railroads in theUnited States. Due to its significant growth and businessopportunities, TCI management decided to increase their shareholdingin CSX Corporation. The management thought that the value of CSXwould increase. However, TCI invested in CSX through differentfinancial institutions through Total Return Swap (TRS) agreements.The agreements began in October 2006. 3G Capital Partners, a hedgefund financial institution, had also started accumulating shares inCSX. 3G was among the main financial institutions used by TCI in itsquest for control of CSX Corporation [CITATION CSX08 l 1033 ].

Noneof the two companies, 3G Capital Partners and TCI, had obtained morethan 5% of CSX shares individually. The companies engaged in someactions in an attempt to gain control of CSX Corporations. Thecompanies considered the leveraged buyout option. TCI and 3G jointlycarried out acquisitions and dispositions. They, however, failed todisclose their group plan until 19thDecember 2007.

Thesole aim of the acquisition of the TRS was to attain beneficialownership of CSX Corporation. Eventually, TCI and 3G jointly acquired8.3%, and TCI individually had 11% through its eight financialinstitutions. On 10thMarch 2008, TCI and 3G proposed to have five director slots in thetwelve member board of CSX Corporation [ CITATION CSX08 l 1033 ].

Acase filed by CSX Corporation in the Southern District Court of NewYork ruled out in favor of CSX Corporation. Judge Kaplan argued thatTCI and 3G violated Section 13 (1) of the Exchange Act by failing todisclose their shareholding in CSX.

References

Colangelo, A. (2008, June 11). CSX Corporation v. TCI and 3G Fund. Retrieved November 16, 2015, from Canadian Securities Law: http://www.canadiansecuritieslaw.com/2008/06/articles/continuous-timely-disclosure/csx-corporation-v-tci-and-3g-fund/