William Ackman’s Pershing Square Capital Management LP, the largest shareholder in Canadian Pacific Railway Ltd., urged the carrier to hire the former chief executive officer of rival Canadian National Railway Co., a person familiar with the matter said.
Some directors are eager to meet with Hunter Harrison, who led Canadian National from 2003 through 2009, after Pershing recommended him as a replacement for CEO Fred Green, said the person, who asked not to be identified because the details are private. The U.S. shares rose the most in a month.
A CEO switch would follow the strategy Ackman pursued at J.C. Penney Co., which brought in Apple Inc.’s retail chief, Ron Johnson, this year after Pershing became the department-store chain’s biggest investor. Canadian National’s net income more than tripled during Harrison’s tenure.
The retired CEO, 67, enjoys “celebrity-like status among investors,” and hiring him probably would boost the stock, Jason Seidl, a Dahlman Rose & Co. analyst in New York, wrote in a note today. He rates Canadian Pacific as “hold.”
Harrison has postponed any meetings with Canadian Pacific until after tomorrow, the date through which he is barred from working for a Canadian National competitor, the person said. Harrison has spoken with Pershing and is interested in returning to work, the person said.
Ackman, 45, invests in companies he deems undervalued and pushes changes he says will improve shareholder returns. The U.S. shares of Calgary-based Canadian Pacific fell 31 percent this year through Sept. 22, a day before Pershing began buying shares, dwarfing the 3.8 percent drop for Canadian National.
Canadian Pacific gained 4.1 percent to $67.67 at 4 p.m. in New York, the biggest advance since Nov. 28.
Ed Greenberg, a spokesman for Canadian Pacific, declined to comment. Jennifer Burner, a spokeswoman for New York-based Pershing, couldn’t immediately comment, and Harrison didn’t return a telephone call.
Pershing disclosed its initial stake in Canadian Pacific on Oct. 28, and has expanded that holding to 14.2 percent. The New York-based hedge fund said Dec. 1 that talks with Canada’s second-largest railroad on changes to operations and management had been “productive.”
Canadian Pacific has been run by Green, 55, since May 2006, and the board is led by Chairman John Cleghorn.
Two Canadian Pacific directors added this month both were suggested by Pershing, the person said. One of them, Edmond Harris, worked for Montreal-based Canadian National under Harrison and later was Canadian Pacific’s chief operating officer.
Earnings at Canadian Pacific rose about 11 percent during the years that Harrison was boosting net income at Canadian National, the country’s biggest railroad.
Canadian Pacific’s ratio of operating expenses to sales is the highest among the major North American carriers and has been equal to or exceeded the average among its peers since 2008, according to Bloomberg Industries data.
The Globe & Mail reported on Pershing’s discussions about a CEO change earlier today.