Bill Ackman’s Pershing Square is one of the leading activist funds in the world, meaning that it invests in companies that are undervalued and works to boost shareholder value. For example, after Ackman took an activist position in department store JC Penney earlier this year, he worked to get ex-Apple exec Ron Johnson appointed as the company’s CEO and for a general change of management.
Pershing Square built up its stake in Canadian Pacific Railway (CP) to over 12% in late October. At that time, “Pershing said in a regulatory filing that CP Rail shares are undervalued and an attractive investment, and that it expected ‘to engage in discussions’ with the Calgary-based company about a wide swath of its business.” There were rumors for a little while that Ackman would sell the railroad, which he quickly put to rest. “We don’t think the company should be sold,” said Ackman. “This is not a case where we’re pushing to sell the company. We don’t think that’s a good way to optimize the outcome for shareholders.” CP Rail told its employees that it is “open to the views of its shareholders,” saying, “We will speak with Pershing Square to hear their input into our plan, already targeted at realizing greater efficiency and improved service reliability.”
But, Ackman was focused on more than just greater efficiency and service reliability. Ackman had his sights set on CP Rail’s Fred Green. “Green, who has worked for CP Rail for 31 years and took over as chief executive in 2006, is blamed for tolerating a culture that critics cite as the key reason why CP Rail’s performance lags behind the US and Canada’s six other Class I railroads.”
It seems that CP Rail disapproves of Ackman’s methods. The railroad company filed a letter with the SEC today that criticizes Ackman for news reports that the hedge fund is courting railway legend Hunter Harrison, who used to work for CP Rail rival Canadian National (CN), as a replacement for the current CP CEO, Fred Green. Specifically, the letter stated:
“On behalf of the Board of Directors of Canadian Pacific I am writing to express concern about recent media reports and to set the record straight regarding assertions attributed to “people familiar with the strategy of Mr. Ackman’s New York hedge fund Pershing Square Capital Management LP.” It is disappointing and highly inappropriate that Pershing Square made inaccurate comments in an article appearing in last Friday’s edition of The Globe and Mail (“CP’s activist investor eyes former CN CEO Hunter Harrison”) and to other media organizations in an effort to advance its own objectives. We are troubled by the inaccuracies and mischaracterizations that have appeared in the media.”
(Read the complete letter here).