Ackman Canadian Pacific CEO Gets Deputy From National

Canadian Pacific Railway Ltd. hired Keith Creel away from rival Canadian National Railway Co. and named him president and chief operating officer to assist Chief Executive Officer Hunter Harrison in his turnaround plan.

The companies reached a settlement to end their outstanding litigation linked to Harrison’s move to Canadian Pacific last year, Canadian National said in a separate release. Canadian Pacific has agreed not to hire certain Canadian National employees until the end of 2016, according to the statement.

Harrison, a former Canadian National CEO who took over after activist investor William Ackman won a proxy campaign, is gaining a potential successor as well as No. 2. The 68-year-old chief executive, who is working to rid Canadian Pacific of its status as North America’s least efficient railroad based on operating ratio, told investors in December his future deputy would get the opportunity to be CEO “in two or three” years.

“The announcement is a positive for CP in that it gives a very clear sense of longevity to the CEO role at CP,” Walter Spracklin, an analyst at RBC Capital Markets in Toronto who rates the stock sector perform, said in a note to clients. “The negative would be the price paid by CP to lure Creel away from CN, and the potential financial implication to CP shareholders from the CP/CN settlement, if any.”

Canadian Pacific fell 2.1 percent to C$113.38 at the close in Toronto, while Canadian National fell 0.6 percent to C$95.14. Canadian Pacific has increased 54 percent since June 28, the day before Harrison took over, outstripping a 10 percent gain by its Montreal-based rival.

Deputy Creel

Creel, 44, holds a marketing degree from Jacksonville State University and completed an advanced management program at Harvard Business School. He began his railroad career at Burlington Northern Railway in 1992 before joining Harrison-led Illinois Central Corp. in 1996. He and Harrison came to Canadian National when the Montreal-based company acquired Illinois Central in 1999.

Chief Marketing Officer Jane O’Hagan and three other operations executives will all report to Creel, Calgary-based Canadian Pacific said.

Creel being president and the decision to have O’Hagan report to him is further indication that Creel will succeed Harrison, said Spracklin, the RBC Capital Markets analyst.

Harrison took the helm at Canadian Pacific after Ackman got then-CEO Fred Green removed. Canadian National then sued Harrison and canceled pension payments, arguing that he had broken a non-compete agreement with his former employer.

Operating Ratio

Since then, Harrison has trimmed his company’s adjusted operating ratio, an industry benchmark that compares expenses to sales, to 74.8 percent. That’s the worst performance among the six Canadian and U.S. railroads that have so far reported fourth-quarter results.

Canadian National said today it will announce Creel’s replacement “shortly” amid “a deep bench of executive talent.” Jim Vena, senior vice president of Canadian National’s southern region, is one potential successor to Creel, according to Benoit Poirier, an analyst at Desjardins Capital Markets in Montreal.

“We wish Keith success in his new role and are pleased to turn the page with respect to the matter of CP’s hiring of CN’s former CEO, Hunter Harrison,” Canadian National CEO Claude Mongeau said in the statement.