Hunter Harrison is Pershing Square's choice for CP Rail - Date unknown Mike Cassese.

16 April 2012

Bill Ackman Dismisses Expected Earnings as "One Good Quarter"

New York New York USA - CP Rail is set to report strong first quarter earnings on Friday that will far exceed expectations, but hedge fund Pershing Square's Bill Ackman argues one good quarter, due to mild weather, won't turn around the company.
 
Ackman, who is leading a proxy fight to change management at the Calgary-based railroad, argues the company has long been under performing and the best way to turn it around is to change the management at the top.
 
He wants to replace the current CEO Fred Green, who has been backed unanimously by CP's board of directors, with Hunter Harrison, who is credited with turning around Canadian National Railway and Illinois Central Railroad.
 
"We have an enormous economic incentive to achieve our simple goal. At market value, Pershing Square owns a more than US$1.8 billion stake in CP, representing one-sixth of our assets," Ackman writes in a letter to shareholders on Monday.
 
"We are all-in and will work extremely hard to maximize value for all shareholders and other stakeholders," he says.
 
"Pershing Square and the seven nominees for management change have one simple goal and no other agenda. Our goal is take CP from its position as the worst performing railroad in North America to its rightful place as one of the best. Doing so will create billions of dollars of shareholder value."
 
Pershing Square has nominated seven individuals including Ackman to serve on CP's board of directors. The elections are scheduled for 17 May 2012 in Calgary at the annual meeting.
 
CP has nominated its current 15-member board of directors as well as Ackman, whose hedge fund is the largest shareholder at 14.2 percent.
 
Ackman also noted that its nominees have "reached into their own pockets and purchased approximately US$2 million of stock in the company," bought in recent weeks at current market prices.
 
He adds that CP's current independent directors only hold 0.2 percent of stock, mostly granted from company, and not bought with their own cash.
 
Earlier this year, Harrison, who retired from CN in 2009, also disclosed that he bought US$5 million of shares to show his commitment.
 
CP's executives have openly suggested that Harrison at the helm could be bad for business, pointing to his safety record at CN Rail as well as some unhappy customers.
 
CP's position is that it has a multi-year plan that focuses on boosting capacity and cutting costs that is already delivering results, so there is no need for change.
 
In a statement issued shortly after Pershing released its letter, CP says its last three consecutive quarters have shown "sustained improvement in operating metrics," and will provide full details for the first quarter on its Friday earnings call.
 
"CP is open to listening to ideas from all shareholders and continues to stand by its offer to William Ackman to join the board," it says. "Unlike the other Pershing Square nominees, CP's directors have extensive and relevant experience in railroads, energy, natural resources, food, agriculture, law, government, banking, and finance."
 
Pershing's nominees include Stephen Tobias a former railroad executive with Norfolk Southern Corp., Gary F. Colter president of corporate restructuring firm, Anthony Melman former managing director of Onex, and Paul G. Haggis chairman of the Alberta Enterprise Corp.
 
Proxy fights are often settled before an actual vote, but the two sides in this battle are so firmly entrenched in their positions it appears this will go right down to a showdown in Calgary.
 
Vanessa Lu.