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Ontario Teachers' Pension Plan, one of Canadian Pacific Railway Ltd.'s (CP-T) largest shareholders, will be backing activist investor Bill Ackman's slate of directors and withholding votes from all current members of the railway's board.
Watch Pershing Square's Bill Ackman in an exclusive interview with Howard Green.
For Ackman, chief executive officer at hedge fund Pershing Square Capital Management LP, the support from Teachers comes as the proxy fight edges closer to a showdown at CP's annual meeting on May 17 in Calgary.
Teachers said Monday that it will be withholding its votes for CP chairman John Cleghorn, CEO Fred Green and the other 13 incumbent directors, including long-serving members such as former Westcoast Energy Inc. CEO Michael Phelps and former Ipsco Inc. CEO Roger Phillips.
CP, which announced last month that its first-quarter profit quadrupled to $142-million, has been touting its own turnaround strategy while opposing Pershing Square's plans to install former Canadian National Railway Co. (CNR-T) CEO Hunter Harrison to replace Green.
Teachers said rival railways are outperforming Calgary-based CP.
"We note CP's performance has been below its peers during Green's tenure as CEO and are not convinced that the most recent results provide irrefutable evidence that CP is performing better than its peers," Teachers said. "CP has failed to persuade us that Harrison would be a liability for CP. We believe that CP's multiyear plan (MYP) is similar to those previously executed by Harrison and that a change in management would not imperil the success of executing the MYP."
Ackman welcomed the strong endorsement, saying he is "honoured" to have an investor of Teachers' "calibre supporting us full-heartedly. We view them as partners and we are going to work with them and all shareholders for the best possible outcome."
New York-based Pershing Square is CP's largest shareholder, owning 24.16 million shares, or a 14.2 per cent stake, while Teachers owns an estimated 2.3 million CP shares, or a 1.33 per cent interest.
"In view of CP's relative historical under-performance, the proven success of Harrison executing similar [multiyear plans], and the absence of compelling evidence that his appointment is harmful to CP, we believe there is more risk in maintaining the status quo and support change at CP," Teachers said.
In addition to Ackman and his hedge fund partner Paul Hilal, the alternative slate comprises former Norfolk Southern Corp. vice-chairman Stephen 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.
CP didn't have immediate comment on Teachers' voting strategy. But the railway reiterated Monday that it believes that a report issued last Thursday by an influential proxy advisory firm, Institutional Shareholder Services Inc., is flawed in its support for Pershing Square's slate.
Meanwhile, the International Brotherhood of Electrical Workers said it has been "approached by a number of CP managers who expressed their disappointment and frustration in dealing with CP," so the union invited the supervisors to join the IBEW.