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U.S. investor activist Bill Ackman is urging Canadian Pacific Railway Ltd. (CP-T) shareholders to back his hedge fund's alternative slate of directors.
Ackman, chief executive officer at New York-based Pershing Square Capital Management LP, said Thursday that underperforming CP requires much-need improvements.
"It's time for a change. With a revitalized board and a new CEO, we are convinced CP will return to its position as a leader" among North America's Big Six railways, he said in letter to CP shareholders.
Pershing Square, which wants to install former Canadian National Railway Co. chief Hunter Harrison as CP's CEO, is recommending that CP shareholders back the alternative slate by casting their votes with a blue proxy and ignore CP's white proxy.
Earlier this week, Pershing Square said retired Norfolk Southern Corp. vice-chairman Stephen Tobias has joined its slate of director nominees that will be put to a shareholder vote at CP's annual meeting May 17 in Calgary.
CP is backing an incumbent team of 15 directors, plus it's recommending Ackman to be the 16th board member.
Last week, CP CEO Fred Green lashed out at Harrison's "flawed" recovery plans that would interfere with an ongoing strategy to run longer and faster trains.
But Ackman said management change is necessary. "For the past six years, the board and Green have led CP down the wrong track," Ackman said in his letter with the proxy circular. "Despite this poor record, the board continues to support Green and the status quo."
In addition to Ackman and his hedge fund partner Paul Hilal, the alternative slate comprise Tobias, Alberta Enterprise Corp. chairman Paul Haggis, corporate restructuring specialist Gary Colter, former Onex Corp. executive Anthony Melman and Rebecca MacDonald, executive chairwoman of Just Energy Group Inc.
Pershing Square acquired a 14.2-percent stake in CP last fall in a bid to revitalize the industry laggard.
In Thursday's circular, Pershing Square criticized CP's performance under Green, who became the railway's CEO in 2006.
"Under the direction of the board and Green, CP's total return to shareholders from the inception of Green's CEO tenure to the day prior to Pershing Square's investment was negative 18 percent while the other Class I North American railways delivered strong positive total returns to shareholders of 22 percent to 93 percent," according to the circular.
"From 2006 to 2011, the board increased the cost of management ratio (named executive officer compensation as a percentage of net income) from 1.2 percent of net income in 2006 to 2.5 percent in 2011."