This e-mail has been condensed from the original.
To: John Cleghorn
From: Bill Ackman
Subject: War and Peace
7:22 a.m. Wed., Jan. 4, 2012
I woke up early this morning thinking about my favourite Canadian railroad and it is causing me to become more interested in military history. We have had what historians will likely call a border skirmish. Not clear who fired the first shot, but a few people have been hurt, some egos have been bruised and the arms dealers, the media, are calling for and attempting to ... a fight. They of course sell more papers if a fight occurs. Their motives are clear. When a border skirmish takes place some times it leads to full-out war and other times things die down, borders are redrawn and peace can remain in both lands. The choices from here as I see them are:
1. Representatives from our side and your side sit down and work things out promptly, working out in my view a quick addition to the board of true reps from our side. Hunter's hiring as CEO.
2. We will be forced to launch a proxy contest at upcoming annual meeting where we will seek to replace a greater number of existing directors with extremely highly regarded business execs who share our belief that management and board changes are necessary at CP.
In the proxy contest as a first step we will take the largest public hall available in Toronto and we will make a presentation to the shareholders and the public that will be simulcast on the Internet about management board failures over the last 10 years at CP. We will examine management's and the board's track record and history at CP and in previous career experiences. Among other issues, we will go into detail on the real reasons behind Ed Harris's departure and compare with what the company said publicly at the time.
We will only do this in the most high-minded manner possible. We will not make any ad hominem attacks on anyone. The process is inherently an uncomfortable one for all parties involved. It is also expensive in time and money and a distraction for management particularly at a time when their focus is needed on operations, most importantly when it is snowing or flooding.
The proxy process will not go well for the board and Fred. The track record is very poor, shareholders are very disgruntled. We are offering an alternative with a legendary reputation. Analysts at Morgan Stanley, your adviser, are now writing a big super-bull case if Hunter is hired. Attached is a copy of the report to this e-mail. We will win the election by a landslide vote – don't rely on my opinion on this, just ask your proxy advisers. Based on yesterday and my not receiving a return call from you, the probability of war occurring has gone up meaningfully. War is not my preference. It has been extremely rare for us – we have only had two proxy contexts in 25 or so active engagements with public companies in the last eight years. War is also not inevitable. I think the failures so far have largely been ones of communication. ...
My impression of you when we met personally was quite favourable – you seemed like a solid good man. I would like to resolve this amicably in the best interests of shareholders. ...
Let's avoid having a border skirmish turn into a nuclear winter – life is too short. Please call me when you can.
From: John Cleghorn
To: Bill Ackman
Bill thank you for your e-mail and for your phone message. Let me reiterate that we would like to reach an agreement which advances the best interests of the company. As you will appreciate I will be discussing your e-mail with my board.