Feb 26 (Reuters) – U.S. railroad Union Pacific (UNP.N) Chief Executive Officer Lance Fritz said on Sunday he would step down this year to make way for new leadership, after hedge fund Soroban Capital Partners called for him to be replaced.
Union Pacific said it expected to name a successor this year and Fritz said he looked forward to working with the board to find a new CEO.
“Union Pacific has been my home for 22 years and I am confident that now is the right time for Union Pacific’s next leader to take the helm,” Fritz said in a statement, without elaborating on the reasons for his decision.
Soroban Capital in a letter on Sunday called for Fritz to be replaced, saying he had lost the confidence of shareholders, employees, customers, and regulators.
Soroban founder Eric Mandelblatt said in the letter new leadership could create significant shareholder value.
The hedge fund said it had a “long-held view that current management is not capable of driving strong operating performance” and saw “a heightened risk of permanent damage to the franchise if left unaddressed.”
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“Unlike typical shareholder engagements which come with numerous demands, Soroban has only one ask – install new leadership who can get the trains to operate safely and on time,” the letter added.
Soroban urged Union Pacific to consider former Chief Operating Officer Jim Vena as a possible replacement for Fritz, saying “no internal candidates are remotely as qualified.”
Vena pulled out of the running to lead Canadian National in December 2021.
The hedge fund, which said it owns about a $1.6 billion stake in Union Pacific, said a change in leadership could generate about $18 of earnings per share in 2025.
Union Pacific reported lower-than-expected fourth-quarter profit, hurt by delayed shipments amid labor shortages and a winter storm that crippled freight operations across the United States.
Union Pacific said in a statement it was looking for a new CEO capable of leading the company for a long-term tenure.
As part of the board’s succession planning process it had considered shareholder input and would continue to do so, and had been engaging with Soroban Capital since 2017.
The development comes after activist investor Nelson Peltz ended his quest for a board seat at Walt Disney Co (DIS.N) this month, after Chief Executive Bob Iger laid out plans to fix the home of Mickey Mouse, cheering investors.
Salesforce (CRM.N) and activist investor Elliott Management Corp are also in discussions to reach an agreement that may end a possible board challenge.
Reporting by Rhea Binoy and Kanjyik Ghosh in Bengaluru; Editing by Chris Reese and Stephen Coates
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