Pershing presses for new CP Rail boss in filing

Thu Apr 5, 2012 4:48pm EDT
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By Susan Taylor and Allison Martell

TORONTO (Reuters) - Activist investor William Ackman argued once again on Thursday that only a new chief executive can lead Canadian Pacific Railway to recovery, in a proxy pitch to shareholders that also seeks support for his slate of seven board nominees.

Ackman, whose Pershing Square Capital Management hedge fund is CP's largest shareholder with a stake of more than 14 percent, said in the filing that nothing more than a new CEO, a major board restructuring and cultural "reboot" will put the railway back on track.

Pershing wants Canadian Pacific to replace CEO Fred Green with former Canadian National Railway CEO Hunter Harrison, citing "dismal" operating results under Green's leadership.

"For the past six years, the board and Mr. Green have led CP down the wrong track," Ackman wrote. "Since Mr. Green became CEO ... CP dropped to dead last in operating performance among Class I North American railroads."

Green has presided over a 3.6 percentage point deterioration of CP's operating ratio, Ackman said. Last year, CP's operating ratio was 81.3 percent, the weakest of North America's Class 1 railroads.

The lower the ratio - or percentage of revenue needed to run a railway - the better.

Over the course of his tenure at Illinois Central Railroad, Harrison pushed that railway to an operating ratio improvement of 16.6 percentage points, Ackman wrote. He added that while Harrison led CN, operating ratio improved by 11.7 percentage points.

Pershing promises to reduce CP's operating ratio to 65 percent within four years of Harrison's appointment as CEO. Some analysts say that is too ambitious and unrealistic.   Continued...

Activist shareholder William Ackman of Pershing Square Capital Management speaks to Canadian Pacific Railway Ltd. shareholders and analysts at a meeting in Toronto February 6, 2012. REUTERS/Mike Cassese