Pershing gets more backing ahead of CP Rail showdown

Wed May 9, 2012 4:26pm EDT
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By Susan Taylor

TORONTO (Reuters) - Activist investor William Ackman's push to shake up Canadian Pacific Railway Ltd (CP.TO: Quote) gathered more steam on Wednesday, with a third advisory firm endorsing his entire slate of board nominees ahead of the company's annual meeting next week.

The backing by Glass Lewis & Co, which mirrors recent recommendations by advisory firms Institutional Shareholder Services and Egan-Jones, points to a poor outcome for CP, Canada's No. 2 railroad, in its bruising proxy battle with Ackman's Pershing Square Capital Management hedge fund.

"We believe the company's serial underperformance from a total shareholder return perspective and its industry-worst operating performance require a far-reaching overhaul of the board and senior management," the Glass Lewis report said.

New York-based Pershing and CP management are locked in a bare-knuckled proxy fight over who should lead CP, the least efficient of North America's big railroads.

Pershing says CP Chief Executive Fred Green must be replaced, ideally by Hunter Harrison, the hard-driving former CEO of Canadian National Railway (CNR.TO: Quote).

Pershing, which is CP's biggest shareholder with a 14.1 percent stake, has presented a fairly straightforward and realistic plan to achieve results, Glass Lewis said.

The firm advised its clients to back Pershing Square's slate of seven nominees and withhold votes to re-elect CP Chairman John Cleghorn and Green as directors.

"The dissident presents a compelling case for the need to overhaul CP's current leadership," the report said. "Simple board representation isn't likely to produce the results that shareholders desire. Rather, an injection of all seven of the dissident's nominees is warranted."   Continued...