Investors brace for next salvo in CP Rail battle

Sun Feb 5, 2012 11:10am EST
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By Nicole Mordant

VANCOUVER (Reuters) - The activist investor rocking the caboose in Canada's usually composed rail sector needs to lay out a clear, compelling and credible turnaround plan for Canadian Pacific Railway (CP.TO: Quote) if he wants to win over shareholders.

As it stands, investors have William Ackman's claim that CP can be turned into one of North America's top-performing railroads under a new chief executive who did just that at rival Canadian National Railway (CNR.TO: Quote). But there's little else.

That may change on Monday when Ackman, whose New York-based Pershing Square Capital Management is CP's biggest investor, takes to the stage at a town hall-style meeting in Toronto, in his first public appearance to talk about Canada's No. 2 railroad.

Flanking the 45-year-old, salt-and-pepper-haired hedge fund manager will be his four fellow nominees for CP's board, as well as respected railroader Hunter Harrison, the former chief executive of CN Rail and Ackman's choice to replace CP's CEO, Fred Green.

"Right now, all that there is, is that Hunter Harrison is a good guy and a good manager and that he turned CN around and therefore he will do it at CP," said Bruce Campbell, president of Oakville, Ontario-based Campbell & Lee Investment Management.

"What I would be looking for is more definitive numbers. I would be looking for something that I can get my teeth into," Campbell said.

Those who have heard Ackman speak expect a slick well-researched presentation from the fund manager, who has not been shy to tackle the boards of U.S. retail companies he believes are underperforming, such as Target (TGT.N: Quote) and J.C. Penney (JCP.N: Quote).

"He is very articulate. He puts his time in. This is not going to be some willy nilly presentation," said Edward Jones analyst Brian Yarbrough who has seen the Harvard Business School graduate speak.   Continued...