CP 8546 rests while another locomotive hauls rail cars through the main yard in Calgary - Date unknown Jeff McIntosh.

3 February 2012

Pershing Proxy Fight Set to be Nasty Brutish and Long

Toronto Ontario - The first blow in a long and nasty fight over control of CP Railway begins Monday in Toronto, when activist investor Bill Ackman takes the floor to make his case for a board shakeup.
 
Ackman's hedge fund Pershing Square Capital Management has launched a proxy fight at CP's annual meeting in May. He has named a slate of five nominees including himself, and his choice for CEO, Hunter Harrison, who is widely credited for turning around CN Rail during his years at the helm.
 
CP's board of directors has unanimously backed the current CEO Fred Green, saying the company's multi-year plan to boost performance is under way and on track.
 
"There's going to be a lot of conflict and hurt feelings," said Tim Rowley, director of governance programs at the Rotman School of Management. "It becomes a real fist-fight."
 
Rowley compares the situation to a vote of confidence in the House of Commons, moving from a governance issue to a political process.
 
"Right now we have a current CEO and a potential CEO, and they're saying one is better than the other. That produces tensions."
 
Ackman will make his pitch directly to investors and analysts, some of whom will be watching a webcast.
 
"He's very articulate," said Brian Yarbrough, an analyst at Edward Jones in St. Louis. "He's not a guy who will do a willy-nilly. He does his homework."
 
"They have to lay a comprehensive plan on how they will get to an operating ratio of 65," Yarbrough said.
 
Ackman believes CP Rail, which is the worst performer of the Big Six railroads in North America, could be more profitable, if it were run better. He has argued that CP can get to an operating ratio of 65 by 2015.
 
Operating ratios are a measure of how efficient a railroad is run, the lower the number the better.
 
CP Rail's ratio hasn't improved under the current CEO Fred Green, said Yarbrough, adding if anything it has worsened, recording an 81 for 2011, though it had weather issues last year. However, in previous years the performance was not great, he said.
 
CP Rail has fought back, arguing the 65 operating ratio by 2015 is unrealistic, setting its own target of 70 to 72 by 2014.
 
"CP has a multi-year plan verified and endorsed by the board of directors to drive volume growth, expand the network, and control costs," said company spokesman Ed Greenberg, adding once those ratios are reached new targets will be set.
 
CP has launched its own campaign, with top officials holding private meetings with institutional investors with more scheduled next week.
 
The proxy fight is expected to get very messy, with CN Rail filing a lawsuit last month against its former CEO Harrison, who retired in 2009, to suspend nearly $40 million in pension and other payments that were due, citing concerns Harrison has breached his non-compete agreement.
 
Vanessa Lu.