TORONTO (Reuters) - Activist investor William Ackman plans to propose a minority slate of alternate directors as he seeks to install a new boss to engineer a turnaround at Canadian Pacific Railway Ltd, a newspaper reported on Wednesday.
The Globe and Mail quoted Ackman as saying he would propose no more than two new directors to represent his Pershing Square Capital Management, on CP’s 15-member board, plus two to three directors independent of both the hedge fund and Canada’s second-largest railway.
CP declined to comment on the report, which indicates that Ackman believes he can win support from other board members to push through change.
“We are confident we can work with the remaining directors once we have the shareholders’ proxy. We will also benefit from the continuity and knowledge transfer from the legacy directors,” Ackman told the newspaper.
Ackman has built up a 14.2 percent stake in CP and is looking at ways to turn around CP. He said he wants directors to campaign for shareholder support to oust Chief Executive Fred Green.
By seeking to replace a minority of directors, Ackman may want to avoid a change of control provision that would be triggered by a majority change in the board.
Green would be entitled to payments estimated at C$27.4 million ($26.8 million) should he be terminated without cause after a change of control, according to the company’s 2011 proxy circular.
Morningstar analyst Keith Schoonmaker said he could imagine why some shareholders might support Ackman, but would not hazard a guess on whether Pershing would ultimately win the proxy battle.
“I can see why other shareholders in addition to Ackman might say, why don’t we get someone who’s actually done this before? - even if he was going to execute exactly the same plan as Green,” he said.
The battle between CP and the New York hedge fund manager heated up this week when CP Chairman John Cleghorn threw the company’s full weight behind Green and his plan to improve its operating performance.
Ackman has tapped Hunter Harrison, a former Canadian National Railway chief executive as his pick to replace Green, saying Harrison is “excited” about the possibility of running the railway.
“We don’t intend to replace a majority of directors, but we want shareholders to give our nominees a mandate to replace Fred Green,” Ackman told the newspaper.
The newspaper said legal experts have suggested CP would likely put the alternate slate to a shareholder vote at its annual meeting this spring.
Reporting by Andrea Hopkins and Allison Martell; Editing by Frank McGurty and Janet Guttsman