May 9, 2012 / 2:22 PM / 6 years ago

UPDATE 1-Pershing wins 2 more endorsements before CP meeting

* Glass Lewis, Egan-Jones recommend Pershing’s entire slate

* Glass Lewis recommends withholding votes for CP chairman, CEO

* Board vote scheduled for CP’s annual meeting May 17

TORONTO, May 9 (Reuters) - Two more advisory firms have backed activist investor William Ackman’s bid to shake up Canadian Pacific Railway Ltd, a big boost for Ackman’s Pershing Square Capital Management in its proxy fight with Canada’s No. 2 railroad.

The endorsements match a recent recommendation from Institutional Shareholder Services Inc, another leading proxy advisor, which recommended Pershing’s slate for election to CP’s board at its May 17 annual meeting.

Pershing and CP are locked in a heated proxy battle over who should lead CP. Pershing says CP CEO Fred Green should be replaced, ideally by former Canadian National Railway CEO Hunter Harrison.

CP has argued that Green has a turnaround plan for the railroad that is working, while Pershing has only a vague strategy. A vote for Pershing Square nominees is a “vote for risk and disruption,” it said Wednesday.

But in a note to clients, Glass Lewis & Co advised its clients to back Pershing Square’s entire slate of seven nominees and to vote against re-electing CP Chairman John Cleghorn and Green as directors.

“We believe the company’s serial underperformance from a total shareholder return perspective and its industry-worst operating performance require a far-reaching overhaul of the board and senior management” it said.

Proxy firms advise large institutional investors ahead of shareholder votes, and their reports can shift votes for or against management in proxy battles.

Egan-Jones took the same approach. “We believe that voting on the dissidents’ ballot for the dissidents’ nominees is in the best interest of the company and its shareholders,” it said.

Ackman pointed out that Glass Lewis recommended shareholders withhold votes for eight of CP’s incumbent directors, while ISS advised withholding votes from six and Egan Jones advised shareholders withhold votes for all 15 of CP’s directors.

“We are unaware of so powerful and uniform an endorsement for change in the history of large cap activism,” Ackman said in a statement.

Ackman has ruled out a compromise with CP, which last week indicated it was willing to negotiate ahead of its annual meeting in Calgary.

Canadian Pacific was not immediately available to comment.

Earlier this week, Ontario Teachers’ Pension Fund, a large Canadian Pacific shareholder, also said it would vote for Ackman’s slate instead of the incumbent board.

“It appears at this stage that Pershing Square Capital Management could win all seven board seats as a result of this proxy contest,” said BMO Capital Markets analyst Fadi Chamoun in a note to clients.

Shares in CP were down 1.3 percent or 93 Canadian cents at C$72.76 on the Toronto Stock Exchange in early trade on Wednesday morning.

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