TORONTO (Reuters) - Canadian National Railway CNR.TO on Friday asked ex-CEO Hunter Harrison to reconsider the idea of taking over as chief executive at rival Canadian Pacific CP.TO, while Harrison’s backers insisted he was the best person for the job.
CN, Canada’s biggest railway, also said it had put activist investor William Pershing “on notice” to stop efforts to induce Harrison to breach contract obligations dating from his 2009 retirement.
But Ackman, whose Pershing Square Capital Management owns 14.2 percent of CP and is pushing for change at the underperforming railroad, said his fund reviewed Harrison’s contractual obligations carefully before proposing him as CP’s CEO.
“What CN is telling the world is that Hunter Harrison is the right person to run CP. There is no greater endorsement,” Ackman told Reuters in an interview.
He said Pershing hired the best lawyers in every jurisdiction involved before moving forward with its proposal.
Harrison was the brains behind the transformation of CN to become Canada’s best-performing railway, touting a system of “precision railroading” that boosted profits. <ID:L1E8CDC6F>
Harrison’s non-compete agreement with his former employer expired on December 31, 2011. If he takes a job at CP before December 31, 2014, he will lose his CN pension, Ackman said, and CP would likely have to assume that obligation. “It’s not a material cost in the context of the value he will create,” he said.
In its statement, CN noted that on his retirement Harrison agreed to a “range of confidentiality and multi-year non-competition and non-solicitation provisions.”
“CN’s Board of Directors is closely reviewing all developments concerning these matters with a view to enforce Mr. Harrison’s contractual obligations to CN and take all actions necessary to protect the legitimate interests of the company,” CN said on Friday.
Ackman is preparing for a proxy battle to replace CP’s current Chief Executive Fred Green with Harrison, and has said that Harrison is “excited” about the opportunity. CP’s board has argued strongly against the change.
Reporting by Allison Martell; Editing by Janet Guttsman