William Ackman, Canadian Pacific Railway Ltd.’s biggest shareholder, said the carrier sought a meeting with his proposed new chief executive officer, rebutting the account given by Chairman John Cleghorn.
Canadian Pacific was eager to talk with former Canadian National Railway Co. CEO Hunter Harrison, Ackman said today in a letter. Hours earlier, Cleghorn wrote that no invitation had been extended to Harrison either through the railroad or Ackman’s Pershing Square Capital Management LP.
“Contrary to your statement in the letter that no one at Canadian Pacific expressed an interest in meeting with Mr. Harrison, on the Saturday after our Wednesday, Nov. 2, meeting, you called me at home and asked that I arrange a meeting with him,” Ackman wrote.
Ackman said he is requesting two Canadian Pacific board seats, for Harrison and a candidate he didn’t identify, and asked that directors meet with him, Harrison and that person. He said he declined a board seat because the terms required him to vote Pershing’s shares in favor of each of the board’s nominees and for directors’ recommendations on other matters.
Canadian Pacific, the country’s second-largest railroad, has been led since May 2006 by Fred Green, 55. Cleghorn said in his letter to Ackman that the Calgary-based company “has a strong management team and an independent board.”
Today’s exchange of letters included assertions by both sides that talks had been “constructive,” even as Cleghorn and Ackman disagreed on the substance of some of those discussions. Cleghorn said Pershing had made “inaccurate comments” about whether Canadian Pacific was interested in Harrison as CEO.
Responding to Ackman’s comments, the railroad said it was standing by its original message today.
Pershing disclosed its initial Canadian Pacific stake on Oct. 28 and has since expanded that holding to 14.2 percent. Ackman, 45, invests in companies he deems undervalued and pushes changes he says will improve shareholder returns.
The railroad’s U.S. shares fell 31 percent in 2011 through Sept. 22, a day before New York-based Pershing began buying the stock, dwarfing the 3.8 percent drop for Canadian National. Canadian Pacific advanced 1.6 percent to $68.74 at the close in New York.
Ackman denied Cleghorn’s statement that he didn’t present a plan for operating improvements at the railroad, whose ratio of operating expenses to sales is the highest among major North American carriers.
“Our plan is to transform Canadian Pacific from the worst performing railroad in North America into one of the best by effectuating a cultural and operational transformation of Canadian Pacific, which begins with a new leader,” he wrote.
Harrison, 67, agreed when he retired from Canadian National in 2009 to a two-year ban on working with a competitor. That prohibition ended Dec. 31, according to a statement today from Canadian National. Net income more than tripled during Harrison’s seven years on the job.
While Cleghorn said that Canadian Pacific was concerned that Harrison’s non-compete agreement with Canadian National would limit his ability to “engage” with the smaller railroad, Ackman said he was the one who explained to Cleghorn that Harrison couldn’t meet with the company until Jan. 1.
“Hunter’s track record, demonstrated first at Illinois Central and then at Canadian National, speaks for itself,” Ackman wrote.
Ackman said he is “supportive” of new board members Tony Ingram and Edmond Harris, who Cleghorn said had received a positive reception from shareholders, customers and employees. Harris worked for Canadian National with Harrison and later was Canadian Pacific’s chief operating officer.
Cleghorn said earlier that Canadian Pacific’s board is still willing to hold talks with Pershing.