Ackman faults CPR payout amid proxy fight to oust CEO
Canadian Pacific Railway Ltd.’ s largest dividend increase in at least 10 years was an attempt to buy support from small investors, said William Ackman, the hedge-fund manager waging a proxy fight to oust CP’S chief executive.
Smart shareholders don’t want a cash distribution if there’s a better use for the money, said Ackman, whose Pershing Square Capital Management LP owns 14 per cent of the railroad. Canadian Pacific, which is resisting Ackman’s push to replace CEO Fred Green, announced a dividend increase of five cents this week. The boost was the largest since 2002.
“Every sophisticated investor that I know doesn’t want a company to distribute cash to them if there’s a better use for that capital in the business,” Ackman said. “That’s clearly an attempt to buy the small, unsophisticated retail shareholder who thinks ‘Ah, this must be good. They’re sending me more money.’ ”
Pershing Square is asking Canadian Pacific shareholders to elect seven nominees who would support management change to the railroad’s board, which has 15 members now. Installing a new CEO would be easiest if all of Pershing’s candidates win seats, Ackman said Wednesday on a BMO Capital Markets conference call with analysts and investors.
The dividend increase would add about $4.8 million per year to the stock’s payout for New York-based Pershing, which owns about 24.2 million shares. The hedge fund spent about $1.4 billion to acquire its stake, which it disclosed in October. The holding’s value has since appreciated to about $1.8 billion.
CP “has had a history since 2005 of announcing dividend increases between February and May, except for 2009, during the recession,” Ed Greenberg, a spokesman, said. “The 17 per cent increase in CP’S dividend reflects the company’s confidence and progress of its multi-year plan.”
While the railroad has said Green has the backing of the entire board, Ackman disputed that. He said Pershing has heard at least one current member doesn’t support the CEO.
“There are a lot of very high-quality people on this board,” Ackman said. “Once this is over, we’ll all work together very quickly to find the right CEO to run the company going forward. If we felt that we needed to change all the directors, we would have run a majority slate. We feel quite comfortable with a large minority slate.”