Expect nasty CP Rail fight

The first blow in a long and nasty fight over control of CP Railway begins Monday in Toronto, when activist investor Bill Ackman takes the floor to make his case for a board shakeup.

Ackman’s hedge fund Pershing Square Capital Management has launched a proxy fight at CP’S annual meeting in May. He has named a slate of five nominees including himself, and his choice for CEO, Hunter Harrison, who is widely credited for turning around CN Rail during his years at the helm.

CP’S board of directors has unanimously backed the current CEO Fred Green, saying the company’s multi-year plan to boost performance is under way and on track.

“There’s going to be a lot of conflict and hurt feelings,” said Tim Rowley, director of governance programs at the Rotman School of Management. “It becomes a real fist fight.”

Rowley compares the situation to a vote of confidence in the House of Commons, moving from a governance issue to a political process.

“Right now we have a current CEO and a potential CEO — and they’re saying one is better than the other. That produces tensions.”

Ackman will make his pitch to investors and analysts, some of whom will be watching a webcast.

“He’s very articulate,” said Brian Yarbrough, an analyst at Edward Jones in St. Louis. “He’s not a guy who will do a willy-nilly. He does his homework. They have to lay a comprehensive plan on how they will get to an operating ratio of 65.”

Operating ratios are a measure of how efficient a railroad is run, the lower the number the better.