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The battle between hedge fund Pershing Square Capital and Canadian Pacific Railway (CP-T) over who should be running the rail operator has intensified yet again. The non-compete issues that have dogged Pershing Square CEO William Ackman's push to oust the current head of CP Rail, Fred Green, and replace him with former CN Rail CEO Hunter Harrison "have been dealt with," a source close to the matter tells BNN's Howard Green.
Harrison is "available to work" if CP wants him, "and eager to accept the challenge if presented" the source says.
Harrison is "ready to go to work and all the obstacles are out of the way" the source adds.
John O'Connell, Chairman and CEO at Davis Rea, tells BNN that appointing Harrison as Chief Executive of CP "makes sense to me and it wouldn't surprise me that Hunter is available."
But he warns that appointing a new CEO won't solve the major problems plaguing the railroad, most notably its pension deficit.
"CP has to be careful what they do because they have a big pension deficit and that has to be dealt with at some point, the company has already put $1.2 billion in and it's still underfunded and it's very sensitive to low interest rates," he says.
Ackman's hedge fund is now CP's largest shareholder, having acquired a 14.2-percent stake in the company since October. In recent weeks the hedge fund has engaged in a public battle with CP's Board of Directors about who should be lead the company.
But CP's Board, led by former Royal Bank of Canada CEO John Cleghorn, say Ackman's push to swap CEOs is not the right way to turnaround the railway.
"Having considered Pershing Square's demand, the board came to the unanimous conclusion that replacing the company's chief executive officer, and thereby jeopardizing the successful execution of the multiyear plan, is not in the best interests of CP or its shareholders," Cleghorn wrote in a recent letter to shareholders. "Pershing Square did not provide a credible, detailed plan to improve CP's operations or make any concrete suggestions -- either in the presentation or in subsequent discussions."
Ackman confirmed to BNN that he intends to pursue a proxy battle to replace the directors at CP.