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Wisconsin Central proxy battle impacting company

By JIM SCHUH
of The Gazette
Efforts to improve shareholder value at Wisconsin Central, Ltd. (WCLX) could result in changes in the railroad company's operations, including those in Stevens Point. But J. Reilly McCarren, president and chief operating officer, says, "It's all speculative" and too early to know exactly how at this point. He was in Stevens Point last week, where he spoke to customers and reporters at an appreciation dinner.

A proxy battle initiated by a Wisconsin Central founder is likely to leave a lasting mark on the railroad. Former Chairman Ed Burkhardt is behind a movement that could result in a sale of the company's foreign rail interests, and perhaps the North American rail operations itself. He owns 7.2 percent of WCLX stock.

Burkhardt, who was ousted by the board of directors, is waging a fight to take over the company, seeking to improve the value of WCLX stock. His former founding partner, Chairman Thomas Power, is battling back, and has undertaken efforts to enhance Wisconsin Central shareholder value. In the past few weeks, the rail firm has retained two financial advisors to develop strategic alternatives that include selling its 24 percent interest in New Zealand Tranz Rail, its other international holdings and even the entire North American rail operations.

On Tuesday of this week, Wisconsin Central began asking its shareholders to oppose Burkhardt's attempt to replace existing board members with his own, by sending out consent revocation materials.

Among the points it makes is during the last three years Burkhardt headed the company, Wisconsin Central's share price fell from $44 to just over $12. The company goes on to say that since Burkhardt's removal, the current management has improved operations in several ways.

The company also said the State of Wisconsin Investment Board - its second largest shareholder with 9.8 percent of the railroad firm's outstanding stock - will support the current directors.

Of the proxy fight, McCarren says, "It's sort of hard to sort this all out, and clearly we have a couple big shareholders who at least are tantalized by the idea of simply being able to cash out their investment right now at a profit." So Wisconsin Central retained Goldman Sachs as a financial advisor "to test the market, to see what prices could be obtained for our whole company, or any part of it - to see if in fact there is truth to the theory that the company is worth more as a sales candidate than an operating company. We don't know the answer to that yet - it may be some time, we'll just have to wait to see what happens," says McCarren.

He adds that he cannot see Burkhardt backing down.

What would happen in Stevens Point if Wisconsin Central sold to another firm?

McCarren said the local yard is here because the customers are here. "It's all the customer freight that keeps the yard in Stevens Point busy," says McCarren. But he adds that it's tough to speculate on what might happen. He says, "You don't know if there's going to be purchasers - if they're going to be another railroad or a financial buyer if there were one, and…even if they were a railroad, how they would look at it, how they would structure it - it's all speculative at this point."

As for how realistic a sale might be, McCarren said he doesn't want to handicap it. "We're going to the market - we've got the best investment banker in the world. This is not a fire sale - we're searching for value," he adds.

"The reality of the situation," says McCarren, "is that Wisconsin Central's North American operations have performed very well this year.

"I think our service levels, frankly, are better than they've been for a long, long time. We've got very high customer satisfaction. The financial results from the North American business are very good…we're actually starting to get some positive cash flow out of the business." McCarren adds that what's important is creating value for the business. He says regardless of what folks say in proxy statements, "the business is growing, it continues to grow, and I think the prospects for its continued growth in the future are great."

McCarren says it's unfortunate that Wisconsin Central's overseas affiliates haven't performed as well as the North American franchise, but the employees here have a right to be proud of the company's performance and the job they do. "I don't think that will go unnoticed by anyone - whether they be a shareholder, customer or central purchaser."

The company recently reorganized management according to current business needs, and eliminated 44 management positions, although some of them were unfilled at the time. While there have been no non-management layoffs, the company is not hiring as many seasonal workers because of a less intensive capital investment program this year.

In the past few weeks, Moody's Investors Service has changed its outlook for WCLX to negative, A.G. Edwards downgraded WCLX stock to "reduce," while Merrill Lynch downgraded the stock to "neutral."
The Wall Street Journal has reported Wisconsin Central's market capitalization at $670 million, but thinks a sale could bring it $1 billion.



	Wisconsin Central proxy battle impacting company By JIM SCHUH of The Gazette Efforts to improve shareholder value at Wisconsin Central, Ltd. (WCLX) could result in changes in the railroad company's operations, including those in Stevens Point. But J. Reilly McCarren, president and chief operating officer, says, "It's all speculative" and too early to know exactly how at this point. He was in Stevens Point last week, where he spoke to customers and reporters at an appreciation dinner. A proxy battle initiated by a Wisconsin Central founder is likely to leave a lasting mark on the railroad. Former Chairman Ed Burkhardt is behind a movement that could result in a sale of the company's foreign rail interests, and perhaps the North American rail operations itself. He owns 7.2 percent of WCLX stock. Burkhardt, who was ousted by the board of directors, is waging a fight to take over the company, seeking to improve the value of WCLX stock. His former founding partner, Chairman Thomas Power, is battling back, and has undertaken efforts to enhance Wisconsin Central shareholder value. In the past few weeks, the rail firm has retained two financial advisors to develop strategic alternatives that include selling its 24 percent interest in New Zealand Tranz Rail, its other international holdings and even the entire North American rail operations. On Tuesday of this week, Wisconsin Central began asking its shareholders to oppose Burkhardt's attempt to replace existing board members with his own, by sending out consent revocation materials. Among the points it makes is during the last three years Burkhardt headed the company, Wisconsin Central's share price fell from $44 to just over $12. The company goes on to say that since Burkhardt's removal, the current management has improved operations in several ways. The company also said the State of Wisconsin Investment Board - its second largest shareholder with 9.8 percent of the railroad firm's outstanding stock - will support the current directors. Of the proxy fight, McCarren says, "It's sort of hard to sort this all out, and clearly we have a couple big shareholders who at least are tantalized by the idea of simply being able to cash out their investment right now at a profit." So Wisconsin Central retained Goldman Sachs as a financial advisor "to test the market, to see what prices could be obtained for our whole company, or any part of it - to see if in fact there is truth to the theory that the company is worth more as a sales candidate than an operating company. We don't know the answer to that yet - it may be some time, we'll just have to wait to see what happens," says McCarren. He adds that he cannot see Burkhardt backing down. What would happen in Stevens Point if Wisconsin Central sold to another firm? McCarren said the local yard is here because the customers are here. "It's all the customer freight that keeps the yard in Stevens Point busy," says McCarren. But he adds that it's tough to speculate on what might happen. He says, "You don't know if there's going to be purchasers - if they're going to be another railroad or a financial buyer if there were one, and…even if they were a railroad, how they would look at it, how they would structure it - it's all speculative at this point." As for how realistic a sale might be, McCarren said he doesn't want to handicap it. "We're going to the market - we've got the best investment banker in the world. This is not a fire sale - we're searching for value," he adds. "The reality of the situation," says McCarren, "is that Wisconsin Central's North American operations have performed very well this year. "I think our service levels, frankly, are better than they've been for a long, long time. We've got very high customer satisfaction. The financial results from the North American business are very good…we're actually starting to get some positive cash flow out of the business." McCarren adds that what's important is creating value for the business. He says regardless of what folks say in proxy statements, "the business is growing, it continues to grow, and I think the prospects for its continued growth in the future are great." McCarren says it's unfortunate that Wisconsin Central's overseas affiliates haven't performed as well as the North American franchise, but the employees here have a right to be proud of the company's performance and the job they do. "I don't think that will go unnoticed by anyone - whether they be a shareholder, customer or central purchaser." The company recently reorganized management according to current business needs, and eliminated 44 management positions, although some of them were unfilled at the time. While there have been no non-management layoffs, the company is not hiring as many seasonal workers because of a less intensive capital investment program this year. In the past few weeks, Moody's Investors Service has changed its outlook for WCLX to negative, A.G. Edwards downgraded WCLX stock to "reduce," while Merrill Lynch downgraded the stock to "neutral." The Wall Street Journal has reported Wisconsin Central's market capitalization at $670 million, but thinks a sale could bring it $1 billion.