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The decision by Pershing Square Capital Management -- run by widely watched investor William Ackman -- to take a 12.2-percent stake in struggling Canadian Pacific Railway has many investors wondering whether the company might consider splitting its infrastructure assets from the operating business. Ryan Mendy, Chief Operating Officer at The Spinoff Report, says the Ackman investment will be a good thing for CP shareholders.
"You need someone in there to energize the management…and there is nothing better than having a shareholder who is smart and has done this before…to get the company back on track," he tells BNN.
"CP could do with splitting up," Mendy says.
Ackman has a track record of pushing companies to unlock the value of their fixed assets. Pershing Square acquired a stake in U.S. retailer Target Inc. in 2007, but lost a proxy battle to install new board members that would consider his proposal to spin out Target's real estate assets into a REIT. Ackman was more successful with his investment in Wendy's, eventually convincing management to divest the Tim Hortons restaurant chain.
Critics suggest separating the infrastructure assets from the operating businesses at CP would result in a higher price in the near term, but would offer little in the long run. Pershing, known for making long term investments, is not expected to take this route, these critics say.