(Adds source based info on new purpose of special meeting)
By Michael Flaherty
March 3 (Reuters) - CSX Corp is nearing a deal with one of its largest investors, activist hedge fund Mantle Ridge LP, to sign up veteran railroad executive Hunter Harrison as the U.S. railroad company's CEO, people familiar with the matter said on Friday.
Talks between CSX's board and Mantle Ridge have been advancing, the people said, getting closer to a deal that could be announced as early as next week. Final details, however, are still being worked out, and the talks may end unsuccessfully, the people added.
The sources asked not to be identified because the negotiations are confidential. CSX, Mantle Ridge and Harrison all declined to comment.
CSX and Mantle Ridge have been locked in a battle over Harrison's contract as well as the investor's intent on shaking up the company's board.
Mantle Ridge owns 4.9 percent of the company, according to a letter the firm published last month.
CSX announced last month that CEO Michael Ward was stepping down, effective on May 31. CSX's stock has surged more than 30 percent since January, when news first appeared that Harrison was planning to leave his CEO slot at Canadian Pacific to seek the top job at CSX.
Harrison,72, would become CEO under a four-year contract, Bloomberg News reported earlier on Friday - which would mark a victory for Mantle Ridge, whose founder Paul Hilal had argued that the company's preference of a two-year deal was not long enough.
CSX has called for a special meeting for shareholders to vote on Harrison's proposed compensation package and for the board seats that Mantle Ridge is seeking.
CSX plans to still hold a special meeting but only for shareholders to vote on who will ultimately pay for the roughly $90 million that Harrison walked away from when he left Canadian Pacific early, one of the people familiar with the matter told Reuters.
Reporting by Michael Flaherty in New York, editing by G Crosse and Diane Craft