(Reuters) - Pershing Square Capital Management on Monday named a railroad veteran to its slate of nominees for Canadian Pacific Railway’s board, in what analysts said was a mostly cosmetic response to criticism that none of its candidates had hands-on industry experience.
Pershing, a U.S.-based hedge fund that is trying to oust CP’s chief executive, added Stephen Tobias, a former chief operating officer and vice chairman of Norfolk Southern Corp, to its slate.
Tobias, 67, who worked for 40 years at Norfolk Southern, is the first and only of the seven nominees announced by Pershing with railroading experience. The fund, run by activist investor, William Ackman had been criticized for this omission.
“This was just to dress up Pershing Square’s nominees right now,” said Dahlman Rose & Co analyst Jason Seidl.
“It’s going to boil down to one thing. Who are the longtime shareholders going to vote for?” Seidl said.
CP’s board has thrown its weight behind its CEO Fred Green. Pershing, CP’s biggest shareholder, wants to replace with Hunter Harrison, the former CEO of Canadian National Railway Co.
Pershing argues that CP’s performance under Green has been sluggish and will be turned around under Harrison, who is credited for transforming CN Rail into North America’s most efficient railroad .
Shareholders will elect a new board at CP’s annual meeting on May 17. Pershing owns a 14.2 percent stake in CP, Canada’s second biggest railroad after CN Rail.
Long-term holders of CP’s stock include the asset management arms of Canada’s biggest banks and pension funds.
They have declined to comment on who they back for CEO but several sell-side analysts have in recent weeks said CP faces an uphill battle to convince shareholders that the same management team that has overseen a weakening of operating metrics can now revive the company.
Monday’s addition to Pershing’s slate “further raises the pressure” on CP, BMO Capital Markets analyst Fadi Chamoun said.
Tobias is credited for initiating and implementing an operating plan at Norfolk Southern that helped the railroad, the third-largest publicly traded in the United States, earn a reputation as one of the most consistent in terms of operations and financial performance, Chamoun said.
He was named railroader of the year in 2008 by industry trade journal Railway Age Magazine. CN Rail’s Harrison won the same award in 2002.
As the seventh nominee to Pershing Square’s slate, Tobias is the last the fund can nominate to CP’s board of 15 without triggering a change of control provision.
CP CEO Green would receive estimated payments of C$27.4 million ($27.58 million) should he be terminated without cause after a change of control, according to CP’s 2011 proxy circular.
Pershing’s other nominees include CEO Ackman and his partner Paul Hilal, management consultant Gary Colter, energy executive Rebecca MacDonald, former Onex Corp executive Anthony Melman and Paul Haggis, former CEO of the Ontario Municipal Employees Retirement System, one of the country’s largest pension funds.
CP’s shares were 1 percent firmer at C$76.51 on the Toronto Stock Exchange on Monday afternoon, rising more than the overall market. Shares of CN Rail were 0.4 percent firmer.
Editing by Frank McGurty