TORONTO (Reuters) - William Ackman’s behind-the-scenes talks with Canadian Pacific Railway Ltd turned public on Tuesday, as the activist investor and the company chairman exchanged jabs on Ackman’s plan to replace the chief executive.
Ackman, whose Pershing Square Capital Management owns a 14.2 percent stake in CP, wants it to replace Chief Executive Fred Green with Hunter Harrison, who led Canadian National Railway, the country’s largest railroad, before retiring in 2009.
CP Chairman John Cleghorn wrote on Tuesday that no member of the board had expressed enthusiasm for the proposal, as media reports stated last week.
Later in the day, Ackman struck back in a letter to Cleghorn obtained by Reuters.
“Contrary to your statement in the letter that no one at Canadian Pacific expressed an interest in meeting with Mr. Harrison ... you called me at home and asked that I arrange a meeting with him,” he wrote.
Ackman went on to outline his plan to turn around Canada’s No. 2 railway.
“Our plan is to transform Canadian Pacific from the worst performing railroad in North America into one of the best by effectuating cultural and operational transformation of Canadian Pacific which begins with a new leader,” wrote Ackman.
For his part, Cleghorn wrote that the board is willing to continue discussions with Ackman, and that Ackman had been invited to join the board of CP, which operates a 14,000-mile network across Canada and into the United States.
Ackman said he had refused to join the board because CP would have made him sign a standstill agreement, requiring him to vote all of Pershing’s shares in favor of the board’s nominees and recommendations.
When Pershing put forward Harrison’s name, CP’s board expressed concerns over Harrison’s non-compete arrangement with CN, Cleghorn wrote. Ackman countered that he had first informed Cleghorn about the non-compete arrangement.
In a statement, CN said the non-compete agreement expired on December 31, 2011. It also noted that, as a condition of his pension package, Harrison may not compete with CN until the end of 2014.
Ackman’s fund, which said earlier this month that discussions with CP had been productive, has raised questions about CP’s poor operating performance and about its management.
Shares of Canadian Pacific closed up 0.83 percent at C$69.58 on Tuesday on the Toronto Stock Exchange.
Reporting by Allison Martell and Pav Jordan in Toronto, and Abhiram Nandakumar in Bangalore; editing by Sriraj Kalluvila, Frank McGurty and Rob Wilson