William Ackman, the hedge-fund manager waging a proxy battle to oust Canadian Pacific Railway Ltd.’s chief executive officer, said his slate of board nominees has won almost all shareholder votes cast so far.
“Ninety-five percent plus are favorable to our directors,” Ackman said today at the Bloomberg Canada Economic Summit in Toronto. About 36 percent of shareholder votes have been logged, said Ackman, who is proposing seven candidates for a 16-member board. “It has to be loud and clear how shareholders feel.”
Ackman, whose Pershing Square Capital Management LP is Canadian Pacific (CP)’s largest investor, has been calling for a new CEO to boost profit at North America’s least-efficient major railroad. The board is backing CEO Fred Green as Ackman champions the hiring of former Canadian National Railway Co. (CNR) CEO Hunter Harrison.
Harrison, 67, would probably stay as CEO for three to five years, and could be succeeded from within Calgary-based Canadian Pacific, Ackman said. While Ackman has said his board nominees don’t have a mandate to hire Harrison, he said today that it’s likely the retired executive will get the job.
‘Risk and Disruption’
Canadian Pacific said backing the Pershing Square slate would be a “vote for risk and disruption.”
“We recommend that shareholders cast their votes in favor of the best 16 directors and not to give Pershing Square seven seats on the board,” Ed Greenberg, a Canadian Pacific spokesman, said in an e-mailed statement. “The aggressive and successful execution of CP’s multi-year plan is creating value for shareholders.”
Canadian Pacific fell 1.1 percent to C$73.69 at the close in Toronto. It was the stock’s fourth consecutive decline, and pared this year’s gain to 6.8 percent.
A Brendan Wood International investor (TII) survey showed growing support for Ackman’s campaign last month heading into Canadian Pacific’s May 17 annual shareholders’ meeting.
Ackman’s case was bolstered yesterday when railroad investor Ontario Teachers’ Pension Plan said it supported Pershing’s slate. That followed last week’s recommendation from proxy adviser Institutional Shareholder Services Inc., also in favor of Pershing’s nominees.
Pershing has heard “an absolute outpouring of support” from employees within the company, Ackman said. Some of the workers have asked to speak with Hunter, and Pershing has arranged phone calls between him and employees, Ackman said.
Canadian Pacific’s ratio of expenses to sales, a benchmark for railroads, has been at the center of Ackman’s fight with the carrier.
Harrison has said he could improve Canadian Pacific’s operating ratio to 65 in 2015. Green, 55, has pledged to lower the measure to a range of 68.5 to 70.5 in 2016. The railroad’s ratio was 80.1 in the first quarter, compared with 79.4 for the same period in 2006, a month before Green took the top job.
Improving operations, rather than a merger or sale, is the best way to boost returns for the railway’s shareholders, Ackman said.
“We don’t think the company should be combined with anyone else,” he said. “To have a competitive environment, you need to have at least two railroads in Canada.”
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