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Pershing Sq Bill Ackman Sets His Sights on CP Rail CEO Fred Green

“Fred Green is a marked man,” reports the Financial Times. “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.”

Fred Green, CP Rail and the Competition

Fred Green told analysts last month that he is satisfied with CP Rail’s progress. “Always remember that whatever we do has to be compared to the competition,” he said. “So if their game is elevating and ours is elevating, that’s good for the customer, good for the fluidity of the railway and the industry. But it may not provide a competitive advantage.” Taking Green literally, compare CP Rail with its domestic rival Canadian National (CN). “CN’s operating ratio, or operating costs as a proportion of sales, improved to 59.3 per cent in the third quarter from 60.7 per cent a year earlier. By contrast, CP Rail’s ratio – tucked away in its financial statements – deteriorated from 73.7 per cent to 75.8 per cent.”

Bill Ackman in front of Perishi

Bill Ackman’s Pershing Square is Leading the Charge

Pershing Square Capital Management, the activist hedge fund founded and managed by Bill Ackman, recently bought a 12.2% activist stake in “CP Rail”, otherwise known as Canadian Pacific Railway (CP). “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.” CP Rail, which “is the sixth biggest by revenue of the seven North American Class 1 railway companies” is valued similarly to its peer but is less profitable. Ackman is targeting Fred Green as the main cause of that lack of profitability.

CP Rail’s board isn’t talking, instead saying that it “is a private matter,” but one thing that is clear is that management has been a major source of criticism for the company. “If there’s one company that is top-heavy, this is it. CP restructures twice a year . . . it spends millions making cuts everywhere but where they are needed, in management,” quotes the Financial Times. An analyst at BMO Capital Markets, Fadi Chamoun, explains, “There has been a level of dissatisfaction among the investor base with CP’s execution over the past nine or 10 years.”

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