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Railroad puts self on block
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November 3, 2000: 1:25 p.m. ET
Fighting ex-CEO takeover try, Wisconsin Central hires Goldman to study sale
By Staff Writer Chris Isidore
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NEW YORK (CNNfn) - Seeking to hold off a takeover effort by its founder and former chief executive, Wisconsin Central Transportation Corp. hired Goldman Sachs & Co. Friday to explore a possible sale of the company.
But Edward Burkhardt, who was ousted from the regional railroad company's top spot in August, 1999, vowed to continue his effort to replace the board and top management.
"The boys see the handwriting on the wall," he said in an interview Friday. "This is a deathbed recanting of their previous policies. The shareholders will have to determine which group they have more confidence in to implement the policy."
The company's statement Friday said that it would be evaluating strategic alternatives including, but not limited to, a sale of the company or a divestiture of its international holdings. Those holdings include minority stakes in freight railroads in Britain, Australia and New Zealand.
 The company's North American operations include 2,850 miles of track in the Great Lakes region. It is the largest company within of a classification known as a "short-line railroad," which generally move freight between rail customers and the major railroads' tracks or yards.
Shares of Wisconsin Central (WCLX: Research, Estimates) stock gained $1.50, or 10.7 percent, to $15.50 in trading Friday, after the announcement about hiring Goldman. Shares are up $4.88, or 46 percent, since Burkhardt announced his takeover efforts Oct. 22.
Management insists it can best change company
Company officials were not available for comment Friday. In their own SEC filing soon after Burkhardt's efforts were made public, the company's management insisted it is getting the company back on the right track with a reorganization of North American operations.
"The Burkhardt Group's so-called "program" for maximizing the value of the company in part mimics the company's announced strategy, but adds a naive, unworkable liquidation plan," said the filing. "We are 13 months into a difficult program of restoring shareholder value. Switching members of the board and management at this time risks delaying or significantly reducing the pace of change necessary to complete the restoration of shareholder value. Moreover, returning control of the company to Mr. Burkhardt, under whose leadership the erosion occurred, turns back the clock."
Burkhardt said that he recommended selling the minority stakes in the company's overseas operations due to disagreements with investment partners about the management plans for those railroads, and that rejection of that proposal by Wisconsin Central's board was one of the factors that led to his departure from the company.
"I believe that all three of those were fundamentally very sound companies and would have been a major success with a united management perspective," he said.
Challenger says he has needed support
Burkhardt's filings with the Securities and Exchange Commission state he owns 3.5 million shares, or about 7.2 percent of average shares outstanding during the recently completed third quarter. Southeastern Asset Management made a SEC filing earlier this week that said it intended to vote its 14.4 percent stake in the company with Burkhardt, and Burkhardt said he's been told by other major and minor shareholders that he has their support.
"We think we'll have sufficient support to prevail," said Burkhardt, who has run a rail consulting business known as Rail World Inc., since his departure from Wisconsin Central. "We'll know when we get there."
A source close to the company, who spoke on condition his name not be used, conceded that Burkhardt's efforts were a factor in the hiring of Goldman, but said it was only a part of the company's efforts to reorganize and improve shareholder valued.
 "No one is happy with the way the stock has performed recently, and some of that started under Mr. Burkhardt's tenure," said the source.
The source said that the company believes a sale to one of the nation's major railroads was possible, despite a 15-month moratorium on major rail mergers imposed by the Surface Transportation Board, which regulates the rail industry, earlier this year. That's because Wisconsin Central is considered a collection of three different "class 2" regional railroads, rather than a "class 1" national railroad.
Burkhardt said he believes a sale of the overall company would be blocked by the current rail merger ban, although he and the company source agree that a sale of its overseas holdings would not be affected by the STB's moratorium. A spokesman with the agency said that he couldn't speculate on such a transaction since there was no proposed purchase filed with the board.
A sale to an investor group or non-rail company would clearly not be blocked by the merger moratorium.
Institutional investors own about three-quarters of the company. Among the groups that has filed its ownership stake with the SEC is Cascade Investments LLC, the group that manages the investments of Microsoft Corp. Chairman William Gates. It said in an April 28 filing that it owned 3.6 million shares, or about 7 percent of the company. 
Click here to send mail to Chris Isidore
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