Ackman Cuts Canadian Pacific Stake After Stock Triples
William Ackman, the activist investor who staged a boardroom coup at Canadian Pacific Railway Ltd. (CP), plans to sell stock for the first time after the price tripled since he took a stake in the carrier in 2011.
Pershing Square Capital Management LP, Ackman’s New York-based hedge fund, will cut its stake by about 29 percent by selling as many as 7 million shares from June 10 through the next six to 12 months, according to a statement today. Ackman will stay on the board, Pershing Square said.
Ackman is reaping the benefits of a turnaround led by his choice as chief executive officer, Hunter Harrison, following a proxy fight to oust former CEO Fred Green. Harrison, who took over 11 months ago, has cut jobs, shut yards and run longer trains as he works to end Calgary-based Canadian Pacific’s status as North America’s least-efficient major railroad.
“Our stake in CP has grown to approximately 26 percent of the combined assets of our funds” with the run-up in the share price, Ackman said in the statement. “Given that increased concentration, portfolio management considerations have driven our decision to trim our holdings.”
With 24.2 million shares, the fund expects to remain the biggest stockholder, and partner Paul Hilal will remain on the board with Ackman, according to the statement. That stake amounted to 13.8 percent of the outstanding shares as of March 31, data compiled by Bloomberg show.
Today’s closing price of C$135.50 in Toronto compared with a close of C$48.59 on Sept. 23, 2011, the day the hedge fund began buying the stock, according to a 2011 regulatory filing. The shares have jumped 84 percent since Harrison took over.
This is the first time that Pershing Square has announced plans to cut its stake, according to data compiled by Bloomberg.
Jennifer Burner, a spokeswoman for Pershing Square at Global Strategy Group, and Ed Greenberg, a railroad spokesman, had no immediate comment on the sale plan.
Harrison, a former CEO of Canadian National Railway Co. (CNR), the country’s biggest railroad, was recruited out of retirement by Ackman to overhaul Canadian Pacific. The 68-year-old Harrison said in May he plans to stay on as CEO for another three years before handing the reins to Chief Operating Officer Keith Creel.
CP Rail’s operating ratio, an industry gauge of efficiency that compares expenses to revenue, was 83.3 percent in 2012, exceeding the 71.7 average of North America’s largest carriers, according to data compiled by Bloomberg.
The railroad’s ratio was 75.8 in the first quarter.
After Pershing Square, Canadian Pacific’s next-biggest shareholder was FMR LLC with 12.8 million shares as of March 31, according to data compiled by Bloomberg.
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