United States of America - In this excerpt from "Railroader: The Unfiltered Genius and Controversy of Four-Time CEO Hunter Harrison", a new book published by Page Two Books that comes out 18 Sep 2018, the long-time railway executive is enticed to join Pershing Square's proxy battle against Canadian Pacific Railway Ltd. (CP) after retiring from Canadian National Railway Company (CN).
 
Once done at CN, Harrison never imagined he'd run another railroad.
 
He was angry and felt sorry for himself.
 
Certainly, "CP would be the last one" he ever thought he'd lead, given its long-running rivalry with CN.
 
However, in an interview I did with him just prior to his leaving CN in 2009, he said people expected him to "fail at retirement."
 
His sister Mary said, "He wasn't ready to retire then."
 
He had worked 24/7 for more than 45 years in an industry he loved.
 
He was also accustomed to being the boss and the sense of identity and stature that went with being a CEO.
 
Fortunately, he had a hobby-horses.
 
His daughter Cayce became involved in show jumping at the age of 10 when they lived in Chicago.
 
His wife Jeannie began travelling to events with her as the family became involved in the sport.
 
While she went with Cayce during the week, Hunter would drive her to the barn on weekends.
 
"He was really supportive of anything I wanted to do in the sport," Cayce said.
 
Eventually, she would marry another rider, Quentin Judge.
 
Harrison ultimately ended up with three luxurious horse farms.
 
One is in Connecticut and was originally one of the state's oldest dairy farms.
 
The subject of a cover story in Equestrian Quarterly, it's set on 87 acres of rolling New England farmland.
 
There are 20 stalls in the main barn, and a total of 40 on the property.
 
There is a 3.5 acre Grand Prix field, a foaling barn, apartments, and a party barn (a.k.a. games room) near the tennis court and swimming pool.
 
There are three homes, two of which have in the past been occupied by his daughters and their families, and the main home, 15,000 square feet, made of timber and local stone.
 
It has indoor and outdoor kitchens, a cinema room, a golf simulator, a putting green (at one point Harrison was a two or three handicap golfer), a trophy room, and a wine cellar.
 
For more than five years, the expansive estate was looked after and managed by the Harrisons' eldest daughter Libby when Hunter and Jeannie weren't there.
 
The other two farms are in Florida in a ritzy enclave where the Gates, Bloombergs, Spielbergs, and Springsteens nest (their daughters are also equestrians).
 
The main one is set on one of the last large parcels within walking distance of the Winter Equestrian Festival.
 
It too has three dwellings that include homes and apartments, a spectacular barn with another packed-to-the-rafters trophy room, as well as a "quiet room" on top for Harrison, with a panoramic view of the property and no electronics (he liked quiet "think-time" each day).
 
The third farm, which is nearby, was an investment in partnership with a Pittsburgh real estate magnate.
 
Double H Farm bought the partner out in late 2017 and then listed it for sale at US$36 million.
 
The Harrison residence is a few minutes away in an exclusive community.
 
Cayce and Quentin run the family's horse business, although Harrison hovered.
 
Post-CN, "he was involved more in the barn... which I simultaneously dreaded and appreciated," Cayce said in May 2017.
 
"Because he's tough and he's argumentative and the two of us can really butt heads."
 
Quentin said Cayce and her dad were very much alike.
 
In spite of Harrison becoming an instant expert on horses, Cayce came to value being challenged by him.
 
She's not alone.
 
McLain Ward, winner of two Olympic golds and top ranked in the world in 2017, was in professional partnership with Harrison during two phases of his career and considered him a mentor.
 
Whether it was big railroads or big sports, "there are a lot of similarities," Ward said.
 
"You're held accountable."
 
Harrison, Ward said, reminded him of his late father, forceful and demanding, like a football coach from the 1950s or 1960s.
 
People who want to do well in life were drawn to him: "You aim for the stars."
 
Together, they owned world championship horses, and like any professional sport, they tried to draft a strong team.
 
Similar to how he recognized railroading stars, Ward said Harrison had an eye for talent in show jumping.
 
As a result, the family's Double H Farm is "one of the most, if not the most, respected private teams in the sport," Ward said.
 
"There isn't an event that they haven't won."
 
Although he loved the sport's scene, created a prestigious brand with Double H, invested in a major equestrian center in Florida, and successfully bred and sold many animals, by 2010 and 2011 Harrison was bored and frustrated.
 
Libby said he was "just kind of lost."
 
He'd be in the kitchen telling people how to cook and clean.
 
Jeannie also noticed her husband pacing in the stalls around the farm.
 
"When he's not happy, no one is happy," his granddaughter Mackenzie said.
 
Her sister Morgan added that, "He drove everyone crazy."
 
Like a tiger in a cage, Harrison wanted out.
 
He needed to work.
 
On top of that, the joke was that Jeannie was simply sick of having him around the house.
 
"He'd be like, Jeannie, where are you going?" Cayce said.
 
"He's never asked her that in 50 years of marriage, probably because every single day he was doing his own thing and worried about his own schedule."
 
His farm-bound purgatory wouldn't last long.
 
In August 2011, Harrison got a call from Pershing Square, an influential, headline-making, American hedge fund run by activist investor Bill Ackman.
 
After identifying what they believe to be an undervalued company, activist investors buy large positions of that firm's stock, agitate for seats on the board, and press for change in order to increase the value of the shares.
 
Pershing managed US$11 billion in assets and had a roster of investors that included, among others, endowments, pension funds, charitable foundations, and individuals.
 
It made concentrated, research-intensive investments wherever it saw value.
 
The caller was Paul Hilal, Bill Ackman's colleague, former college roommate, and close friend.
 
Hilal had first taken note of the railroad sector in 2008 when two other investment funds bought a major position in CSX.
 
(Harrison was approached then by a former colleague who was associated with those investors, Gil Lamphere, to see if he was interested in running the American railroad, but Harrison was still running CN and he declined.)
 
Hilal didn't think about the sector again until 2011, when over dinner his brother Philip heard about poor performance at a Canadian railroad and called his brother, suggesting there might be an opportunity.
 
It didn't take a rocket scientist to identify the candidate.
 
CP and CN were galaxies apart when it came to performance.
 
CP's operating ratio that year was 81.3 percent, while CN's was 63.5.
 
Paul Hilal, then in his mid-40s, also noticed during his research that whenever anyone mentioned railroads, one name kept coming up, Hunter Harrison.
 
According to Pershing's calculations, while CEO at IC, Harrison had made shareholders 450 percent and another 350 percent at CN.
 
In early August, Hilal said things were relatively sleepy in New York's financial community.
 
He started sniffing around CP, was immediately intrigued, and said he cancelled his own vacation.
 
Over the next nine weeks he estimated he logged 1,000 hours researching the company, the sector, the regulatory environment, and Harrison, an average of 15 hours a day, seven days a week.
 
Hilal had been working at Pershing since 2006 and was always hungry for opportunity.
 
CP looked like a possibility, if Pershing could persuade the railroad's board to replace its CEO with the retired railroader.
 
Anxious to speak with Harrison, Hilal got a number for the farm in Connecticut.
 
He got through to the barn and identified himself as a New York financial type.
 
The person who answered connected him to Harrison's office in the house.
 
The retired CEO picked up the phone.
 
Hilal was careful not to let Harrison know the real purpose of his call, to secure him as Pershing's candidate to run CP.
 
Hilal positioned it as a "teach me" call about the industry.
 
Harrison thought it would be a 10 minute conversation.
 
But Harrison was a talker and so is Hilal.
 
It was three and a half hours.
 
Although he was fascinated with what Harrison was saying, Hilal was extremely uncomfortable during the call.
 
He had to go to the bathroom, but he was afraid to end the conversation because he worried that he might never get Harrison on the phone again.
 
"Gold is coming out of the phone and I had to go to the bathroom," Hilal said.
 
At the end of the call, Hilal asked him if he would consider consulting for Pershing.
 
Harrison said yes but added that he didn't come cheap.
 
"You're going to pay me X a day and I'll work my ass off for you," Harrison told him, and charged $10,000 a day.
 
Harrison didn't need the money, but he wanted it to determine whether Pershing was taking his time seriously.
 
Hilal described what Harrison said to him on the phone as a "master class," an unbelievable exposition on Precision Scheduled Railroading.
 
"I was blown away."
 
After some basic valuation work, Hilal thought Pershing could triple its money if it landed Harrison.
 
After their initial conversation, Harrison spoke at length on the phone with Hilal several times as a consultant, as well as in marathon meetings at Pershing that included Hilal's 25-year-old associate, Brian Welch.
 
Welch was a new hire who, alongside Hilal, did "deep dive" research on railroads, and in particular, CP.
 
Hilal and Welch grilled Harrison on the rail sector.
 
"There was no mention of CP. I had no idea," Harrison said. With Harrison on board as a "consultant," Pershing used him to check the work of other consultants.
 
Pershing would get Harrison to listen in on calls with paid advisers and then ask what he thought.
 
The firm, Hilal said, told the consultants they had someone else listening, but did not reveal who it was.
 
The consultants had no idea it was Hunter Harrison.
 
"You're payin' for that?" he said to Pershing.
 
It was ironic Harrison was being paid as a consultant, given the dim view he had of such types, which he characteristically dismissed as "washouts." Little did Harrison know that on 23 Sep 2011, Pershing bought 330,814 shares of CP at US$46.41 ($47.72).
 
It continued buying for the rest of the month and throughout October as the price rose.
 
"We started piling in and at times we were buying 20 or 30 percent of the daily volume, driving the shares up in the process." Hilal said.
 
Still masking his intentions with Harrison, he asked hypothetical questions about what would happen if this railroad or that railroad implemented Precision Scheduled Railroading.
 
Hilal had a backup plan.
 
If he couldn't land Harrison, "I was going to go for Keith (Creel)," who became chief operating officer at CN in January 2010, less than a month after Harrison's departure as CEO.
 
Hilal kept Creel's cellphone number on a Post-it note stuck to his computer monitor for months, resisting the urge to call for fear of being in violation of a non-solicit clause in Harrison's agreement with CN.
 
Eventually, though, he tested whether Harrison would be receptive to running another railroad.
 
Hilal told me that Harrison said he would, and that CSX made the most sense, but that no board would hire him.
 
Hypothetically, Hilal raised the notion of CP.
 
"Well, why would I go back to run a smaller railroad?" Harrison asked.
 
Hilal made the case that the opportunity was sizeable compared to other railroads.
 
CP was in the worst shape, therefore, the opportunity was greater.
 
He also cited the fact that Harrison knew CP as a competitor, knew Canada, the regulatory environment, the weather, the customers, and unions.
 
Contractually with CN, Harrison had a two-year non-compete clause restricting him from taking such a job until 2012.
 
But Hilal made a seductive argument, he, Hunter Harrison, was uniquely qualified to create astronomical shareholder value at CP.
 
"Then at some point, he's just kind of quiet and you could tell he's thinking about it," Hilal said.
 
"I mean, it's a complete layup for him."
 
On 13 Oct 2011, Harrison was sitting in one of the conference rooms at the fund's offices (13 Oct 2018 is a "best guess" by Pershing, based on emails).
 
In one corner, there was a peculiar-looking contraption, a 1951 rocket-powered ejection seat from a Canberra Nuclear Strike Bomber.
 
It had been put there as a graphic reminder to staff at Pershing to bail out if an investment went bad.
 
Pershing is known for making big bets on investments that Ackman and his team have rigorously targeted and researched.
 
The firm has made a fortune on certain investments and lost a fortune on others, but Ackman has been considered an investor to reckon with, and one who causes friction, not unlike Harrison.
 
The 42nd-floor offices Harrison visited are heavy on glass and modern design, with a view of the entirety of Central Park.
 
He heard somebody coming down the hall and then saw a tall man walking in an animated, energetic manner toward the conference room where he was sitting.
 
Ackman bounded into the room and introduced himself.
 
"Why don't you and I go to lunch?" Ackman said to Harrison.
 
Hilal said he had arranged the lunch, booked the time in Ackman's calendar, and made the reservation for just two people so Ackman could independently form his own judgment of Harrison.
 
He also believed a one-on-one would allow each man to size the other up and develop trust.
 
The duo then walked to The Modern, the upscale restaurant at the Museum of Modern Art.
 
Ackman has long legs and is a fast walker.
 
Harrison, who'd had a vascular procedure in his legs that summer, was huffing and puffing by the time they arrived.
 
Ackman, an advocate of healthy living, soon became Harrison's informal nutritionist and exercise coach.
 
"When I would sit with him at dinner, I would pull away the wine bottle. I wouldn't let him eat dessert," Ackman said.
 
"He must have thought I was a fucking pain in the ass."
 
They went to a table in the right corner by the window, the least conspicuous part of the restaurant. Ackman is a familiar face in certain circles in New York.
 
He said that if someone recognized Harrison, he worried they'd put two and two together.
 
The lunch lasted a couple of hours.
 
"We want you to get CP and we want to know your thoughts and I want you to run it," Ackman said, cutting to the chase.
 
"Bill, you can't afford me," Harrison said, half-kidding.
 
Ackman told him what he had in mind for compensation.
 
"Looks good to me," Harrison said.
 
"Ackman and I made that deal in a day."
 
The chemistry was good.
 
So was the potential for each of them to make a lot of money.
 
Ackman said, "in the first five minutes, you could tell he was the right guy."
 
"I mean this guy's a general. He's like Patton," Ackman said.
 
"And running a railroad is like running an army, right?"

Excerpted from "Railroader: The Unfiltered Genius and Controversy of Four-Time CEO Hunter Harrison" by Howard Green. Copyright 2018 by H&H Media Inc. Produced by Page Two Books. Reproduced by arrangement with H&H Media Inc. All rights reserved.
 
Howard Green.