Union Pacific Looking for New CEO to Replace Lance Fritz

Hedge Fund Cites 'Persistent Operating Underperformance'
Union Pacific CEO Lance Fritz
UP said Fritz will stay on to ensure a smooth transition. (Victor J. Blue/Bloomberg News)

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Union Pacific Corp. said it’s looking for a candidate to replace Chief Executive Officer Lance Fritz.

The railway company said it expects to name a successor this year, after its board engaged a consultant in March 2022 and formed a task force of directors in November, according to a statement Feb. 26.

“We are immensely grateful to have Lance’s continuing leadership and support and know he will ensure a smooth transition,” Michael McCarthy, Union Pacific’s lead independent director, said in a statement.

Union Pacific said it has considered shareholder input and will continue to do so, adding that it has engaged with Soroban Capital Partners since 2017. The hedge fund released a letter on Feb. 26 urging Union Pacific to replace Fritz, and named Jim Vena, the former chief operating officer of Union Pacific, as a leading external candidate for the CEO role.

Led by Eric Mandelblatt, Soroban said it owns a roughly $1.6 billion stake in Union Pacific, adding that it had on previous occasions privately expressed its “displeasure with years of persistent operating underperformance” at the rail company. The firm added that it has just one ask: “install new leadership who can get the trains to operate safely and on time.”

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The hedge fund has a “long-held view that current management is not capable of driving strong operating performance” and sees “a heightened risk of permanent damage to the franchise if left unaddressed,” Mandelblatt said in the letter. New leadership can create significant shareholder value, he wrote.

The Wall Street Journal reported earlier reported on Soroban’s communications with Union Pacific’s board.

The rail company has a market capitalization of $119 billion. Its shares have fallen about 20% in the past 12 months, slightly underperforming the S&P 500 Railroads Index that fell roughly 15% in the same period.