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Canadian Pacific Rival Warns Ex-Chief to Stay Away From Ackman

January 13, 2012 | About:
Dheeraj Grover

Dheeraj Grover

18 followers
Bill Ackman recently established a large position in struggling Canadian rail company Canadian Pacific. Bill has launched a proxy fight to remove the current CEO and Board of directors of Canadian Pacific and replace them with his handpicked people to turnaround the company.

Bill Ackman is a well known activist investor. He buys the common stocks of public companies, and pushes for changes so that the market can realize the values of the companies. Bill is well known for his investment in Fortune Brands and key role he paid in the split of the company to realize higher shareholder value.

Discussing his intentions for the first time since he acquired a 14.2 per cent stake in CP last fall, Mr. Ackman said in an interview Monday that his New York hedge fund, Pershing Square Capital Management, is soliciting candidates for a new slate of directors to oversee the national

railway.

It appears he has zeroed down on ex CEO of Canadian Pacific rival Canadian National Railway for the post of CEO of the Candian Pacific. CNI ex CEO E Hunter Harris has been well known for turning Canadian National into one of North America’s most cost-efficient railways. Canadian National has the

best operating ratio in whole of North America Rail industry.

Bill has chosen the right candidate but he has appeared to have hit the hurdle with Canadian National publicly cautioning its former chief executive, E. Hunter Harrison against participating in the hedge fund manager William A. Ackman’s plan to put him in charge of running the Canadian Pacific Railway, saying that would violate his employment contract.

Canadian National, however, does not appear interested in seeing Mr. Harrison improve the fortunes of its rival.

“As part of his employment contract with C.N., Mr. Harrison agreed, upon retirement as president and chief executive officer on Dec. 31, 2009, to be bound by a broad range of confidentiality and multiyear

noncompetition and nonsolicitation provisions,” Canadian National said in an e-mail statement

Canadian National has asked Mr. Harrison to respect his commitments to C.N. and to reconsider his expressed interest in a position at Canadian Pacific,” the Montreal-based railroad said. “C.N. has also put Bill Ackman of Pershing Square Capital Management, L.P., on notice to cease any efforts to

induce breaches of Mr. Harrison’s contractual obligations to C.N.”

Mr. Harrison’s blanket non-compete agreement with Canadian National expired at the end of 2011. But Canadian National said in an earlier statement that his retirement and pension arrangements separately prohibited him from competing against the company or trying to hire its employees until the end of 2014.

Read the complete story here for further details

http://dealbook.nytimes.com/2012/01/13/canadian-pacific-rival-tells-ex-chief-to-stay-away-from-ackman/?partner=yahoofinance

It will be very interesting to see how Bill goes about his proxy fight when bigger and influential company like Canadian National has stood up to oppose the changes in addition to the stiff opposition from Canadian Pacific current CEO and board. If he succeeds than it will be a good opportunity for investors to pick up shares of Canadian Pacific because I am sure that in the company of Mr E Hunter Harrison Bill will be successful in turning the company around and increase the value of its stock

About the author:

Dheeraj Grover
I am an individual investor with deep interest in the field of value investing. My ideas and thinking is inspired by highly respected value investors like Ben Graham, Warren Buffett, Walter Schloss, Bill Ruane and Tweedy Browne

Rating: 2.0/5 (5 votes)

Comments

pravchaw
Pravchaw premium member - 2 years ago
I don't know how you are so confident in declaring success and recommending picking up shares. CP has already gone up from 45 to 65 in 3 months. If anything the stock should be shorted. For all you know Ackman's already selling having made a bundle by stirring up controversy.

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