Canadian National railroad facing more investor pressure

In this March 29, 2018 file photo, a Canadian National Rail locomotive moves through the rail yard in Dartmouth, Nova Scotia. Kansas City Southern is in talks with Canadian Pacific, Saturday, Sept. 4, 2021, to determine whether its $31 billion bid is the best offer on the table after regulators rejected a key part of Canadian National’s $33.6 billion offer last week. (Andrew Vaughan/The Canadian Press via AP)

In this May 23, 2012, file photo, surveyors work next to Canadian Pacific Rail trains which are parked on the train tracks in Toronto. A planned shareholder vote on Canadian National's $33.6 billion offer has been delayed, Wednesday, Sept. 1, 2021, after regulators rejected a key part of the plan, so now Kansas City Southern can consider all of its options, including a competing $31 billion offer from Canadian Pacific Railway. (Nathan Denette/The Canadian Press via AP, File)

In this May 13, 2021, file photo, a man walks into Central Station next to Canadian National headquarters in Montreal. Canadian National’s $33.6 billion deal to acquire Kansas City Southern railroad is in jeopardy after federal regulators rejected a key part of the plan Tuesday, Aug. 31, 2021 and opened the door for a competing $31 billion offer from Canadian Pacific railroad. (Graham Hughes/The Canadian Press via AP, File)

In this Nov. 27, 2020 file photo, a Canadian National rail worker stands on an idle locomotive as protesters opposed to the Trans Mountain pipeline expansion block rail lines, in Burnaby, British Columbia. A day after being spurned by Kansas City Southern, Canadian National railroad, Monday, Sept. 13, 2021, is facing additional pressure from a major investor who wants CN to abandon its effort to buy the U.S. railroad. (Darryl Dyck/The Canadian Press via AP)

OMAHA, Neb. (AP) — A day after being spurned by Kansas City Southern, Canadian National Railway is facing additional pressure from a major investor who wants CN to abandon its effort to buy the U.S. railroad.

The London-based investment firm TCI Fund — which owns about 5% of CN's stock and about 8% of rival Canadian Pacific's shares — said Monday that it is calling for a special CN shareholder meeting where it plans to nominate four new directors. TCI has said it thinks CN should overhaul its board, get a new CEO and refocus its efforts on improving its own operations.

“History has shown that with the right leadership railroads can be improved quickly. TCI’s independent and highly skilled nominees, if elected, will help lead and guide the selection of a new CEO," said Chris Hohn, TCI founder and managing partner.

TCI has said that a former CN executive who also served as Union Pacific’s head of operations for several years, Jim Vena, should be named CN’s next CEO.

Currently, CN is led by JJ Ruest, who has been president and chief executive since July 2018. Ruest has been with the railroad since 1996.

Canadian National officials said they are aware that TCI is calling for a special meeting and will respond once it receives the official paperwork. The railroad did say Sunday that it would evaluate all of its strategic options after Kansas City Southern picked Canadian Pacific's $31 billion offer over CN's higher bid.

Canadian National had bid $33.6 billion to acquire Kansas City Southern but regulators rejected a key part of its plan last month. Under the terms of its merger agreement with KCS, CN still has five business days to respond and possibly sweeten its offer.

But Canadian National's bid became less attractive after the Surface Transportation Board said last month that it wouldn't be able use a voting trust to acquire Kansas City Southern and then hold the railroad during the board’s lengthy review of the overall deal, which could take 18 months or more.

Benchmark Research analyst Nathan Martin said in a note that he believes CN should bow out of the bidding at this point to concentrate instead on improving its service and growing its business organically. He rates the stock a “Hold.”

Regulators have approved Canadian Pacific's use of a voting trust as part of its plan to acquire Kansas City Southern because there are fewer competitive concerns about combining Canadian Pacific and Kansas City Southern and those two are the smallest of the major railroads.