Candian Pacific Would Add Bill Ackman to Board, Refuses Other Demands

Candian Pacific Would Add Bill Ackman to Board, Refuses Other Demands



Bill Ackman, CEO of Pershing Square Capital Management, has been waging a war to implement change at Canadian Pacific Railroad Limited  (NYSE:CP). Ackman specifically wanted to remove Canadian Pacific CEO Fred Green, and replace him with railway-industry veteran Hunter Harrison. Ackman currently controls 14% of shares outstanding, making him the largest shareholder.

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The company just released a filling with the SEC, in which they stated their desire for a compromise.

The filling stated (emphasis ours):

The Board and Canadian Pacific have sought meaningful engagement with Pershing Square and have attempted to foster a constructive dialogue. Members of the Board and management team of Canadian Pacific met with Pershing Square within days of Pershing Square’s first disclosure of its holding in Canadian Pacific and a number of meetings and conversations took place over the following weeks. As a result of these meetings, an invitation was extended to Mr. William A. Ackman, Chief Executive Officer of Pershing Square, to join the Board so that a constructive Board-level dialogue based on all the relevant facts and information could take place. The invitation to Mr. Ackman remains open and, in that regard, Canadian Pacific has included him as one of the nominee directors that we recommend to Canadian Pacific shareholders.

Management has given into one of Ackman’s main demands, which is that Ackman be on the company’s board. The company had previously agreed to add Ackman to the board, but Ackman refused, stating that the agreement would “handcuff” him from implementing change.

Canadian Pacific refused the other demands, including Ackman’s request to oust the current CEO, Fred Green.

The Company attacked Ackman and his nominees, stating the following:

Pershing Square’s nominees who accompany Mr. Ackman have no evident railroad industry experience and add no other complementary industry experience.

This statement is interesting because Ackman’s requested Hunter Harrison to be the new CEO. Hunter Harrison, former CEO of Canadian National Railway (NYSE:CNI).  Harrison was credited by many with successfully turning around the ailing company.

The company then specifically attacked Harrison, but offered little explanation:

The Board strongly disagrees with Pershing Square’s demand that Canadian Pacific replace its CEO with Hunter Harrison. The Board believes that Mr. Harrison is not the right leader for Canadian Pacific. Furthermore, Pershing Square has presented no credible, detailed plan to support its assertions about reducing Canadian Pacific’s operating ratio. The approach advocated by Pershing Square and its nominees, none of whom has any operational or related experience with Class I railroads, risks moving Canadian Pacific in the wrong direction by seriously delaying and disrupting our progress in executing the Multi-Year Plan, thereby negatively impacting shareholder value. 

We expect Ackman to launch a proxy war since the company has effectively not offered anything new to satify Ackman’s demands.

We have been covering three famous value investors who are currently fighting proxy wars. Dan Loeb with Yahoo! Inc. (NASDAQ:YHOO), Carl Icahn with CVR Energy, Inc (NYSE:CVI), and now Bill Ackman with Canadian Pacific.

The full statement can be found here.

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