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Ackman to propose minority slate of alternative directors in fight for CP

Hedge fund manager William Ackman of Pershing Square Capital Management.

© Shannon Stapleton / Reuters/Shannon Stapleton /REUTERS

Bill Ackman plans to propose a minority slate of alternative directors for Canadian Pacific Railway Ltd. that will campaign for shareholder support by calling for the ouster of chief executive officer Fred Green.

"We don't intend to replace a majority of directors, but we want shareholders to give our nominees a mandate to replace Fred Green," Mr. Ackman said.

The New York activist is CP's largest shareholder with a 14.2-per-cent stake that he holds through his New York hedge fund Pershing Square Capital Management. Canadian Pacific currently has 15 directors, many of them leading Canadian business leaders. Mr. Ackman said he plans to propose no more than two new directors to represent Pershing and an additional two to three directors who will be independent of the hedge fund and the railway.

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"We are confident we can work with the remaining directors once we have the shareholders' proxy. We will also benefit from the continuity and knowledge transfer from the legacy directors," he said.

Pershing Capital is currently reviewing potential directors, but Mr. Ackman would not identify the candidates or say when he plans to unveil the proposed slate.

CP officials have declined to comment on Mr. Ackman's announcement Monday that he plans to launch a proxy contest at the railway, but legal experts have suggested the company will likely put the alternative slate to a shareholder vote at its annual meeting this spring.

By moving to replace a minority of directors at CP, Mr. Ackman appears to be seeking to avoid triggering a change of control provision at the railway. Sources said a change of control at CP could force the company to repurchase some of its debts or pay additional compensation to executives such as Mr. Green who are eligible for multimillion-dollar settlements if they lose their jobs in the wake of a control change.

Mr. Ackman has been seeking to replace Mr. Green with retired Canadian National Railway chief Hunter Harrison since November, shortly after he acquired his stake in the railway.

The activist and CP's board have discussed a number of potential board changes, including terms for appointing Mr. Ackman as a director. But talks between the company and Mr. Ackman broke down this week after the railway's chairman John Cleghorn issued a statement supporting Mr. Green's leadership and rejecting Mr. Harrison as a CEO candidate.

The prospect of Mr. Harrison's appointment boosted CP's stock price and was cheered by a number of financial analysts, but the company's board declined to meet or enter discussions with the Tennessee-born railway executive.

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