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Activist investor William Ackman shut the door on Tuesday to a late compromise with Canadian Pacific Railway Ltd (CP-T), and the country's second-largest railroad is now likely headed for an embarrassing defeat in a proxy vote next week.
Roughly one-third of CP shareholder votes have already been cast, and of those more than 95 percent are in favor of U.S. hedge fund Pershing's slate of directors versus CP's, said Ackman, whose Pershing Square Capital Management is CP's largest shareholder.
With shareholder polls ranged against it, CP indicated last week that it was willing to negotiate a compromise with Pershing ahead of the vote at its annual shareholder meeting next Thursday, May 17, in Calgary.
But Ackman insisted on Tuesday that a shareholder vote is the best way to end the struggle over the shape of the CP board. "I think it actually needs to go to a vote," he told the Bloomberg Canada Economic Summit in Toronto.
Asked if he would accept any type of compromise from CP at this stage, Ackman said: "No. The shareholders we talk to want the vote and the message delivered."
Ackman's aim is to replace CP chief executive Fred Green with Hunter Harrison, the hard-driving former CEO of Canadian National Railway. Pershing launched its slate of dissident directors -- there are now seven, including Ackman -- after the existing board backed Green.
Ackman said shareholders should also have a chance to decide which of CP's 15 current directors should stay on the board.
Pershing says that CP is less efficient and less profitable than North America's other big railroads and that Harrison is the man to turn it around.
"Fred Green is not a railroad operator. He's a sales and marketing executive who made his way up the organization, he's a good relationship guy," Ackman said.
"The railroad needs to be run by someone like a general -- Hunter is a lot more like Patton," he said, referring to World War Two U.S. Army General George Patton.
Ackman, however, said he is open to other CEO candidates, and that a new board would conduct a full search.
Recent polls indicate that most institutional shareholders favor the Pershing nominees over CP's existing directors. On Monday, CP suffered another blow when the Ontario Teachers Pension Fund said it would vote for Ackman's slate instead of CP's incumbent board.
Ackman said the proxy contest has cost Pershing $10 million US to $15 million.