Former CN chief says he'd be 'honoured' to turn around Canadian Pacific Railway

The battle over control of Canadian Pacific Railway Ltd. (TSX:CP) heated up Tuesday, with dissident shareholder William Ackman announcing a five-member slate of nominees he'd like to see join CP's board of directors.

In the same announcement, retired Canadian National CEO Hunter Harrison made his strongest public comment yet on his hope to be installed as the new chief executive of CP — over the objections of its current directors and his former employer.

"I'm proud of the work we did at CN, and the positive impact that improving its performance had on shareholders, employees, customers and Canada," Harrison said.

"The great majority of Canadian Pacific's employees are extremely talented and dedicated. With the right board and executive leadership, I believe Canadian Pacific can achieve just as dramatic a turnaround and enjoy its rightful position as a leader in the North American rail industry. Together, we can transform CP into the railroad its customers, employees and shareholders deserve. I would be proud to help lead CP to that victory."

"Should the board determine that I am the best candidate to lead the company, I would be honoured to serve," Harrison said.

Harrison has made similar comments before to reporters but the statement, issued by Ackman's Pershing Square, dispels any doubt that the renowned railway executive hasn't been dissuaded by the possibility of a fight with his former employer — Montreal-based Canadian National (TSX:CNR).

CN announced Monday that it has suspended pension and other payments to Harrison and gone to court in the United States to get a declaration that it has the right to do so under non-competition agreements signed when he retired in 2009.

One of those agreements — that he not work for a rival — expired Dec. 31 but there are two other agreements that CN says are still in effect. One prevents Harrison from hiring away CN employees to a rival and the other relates to his pension benefits from Canadian National.

Ackman, who is known as an activist investor, said Tuesday that his Pershing Square group has put together a "superlative slate of nominees" for the Canadian Pacific board of directors — including himself.

"With a revitalized board and new management, we will help CP transform from the worst to one of the best performing Class I railroads in North America," Ackman said in the statement Tuesday.

None of the Pershing Square nominees is on CP's current board of directors, which has 15 members including CP chief executive Fred Green and John Cleghorn, a former CEO of Royal Bank, who is chairman of the railway's board.

CP later issued a statement in which it "noted" the Pershing Square news release but quoted Cleghorn as expressing confidence in the current slate of directors.

"CP has an independent board made up of directors with extensive, relevant experience in railroads and complementary industries including energy, natural resources, food and agriculture, as well as leaders from the fields of law, government, banking and finance," he said.

He also reiterated that the current directors have confidence in the railway's multi-year turnaround plan led by Green.

"We continue to stand by our offer to have Mr. Ackman join our board so that a constructive board-level dialogue based on all the relevant facts and information can commence and so that we can work together for the benefit of all shareholders," Cleghorn said.

Besides Ackman, 45, the other Pershing nominees are: Gary Colter, Paul Hilal, Rebecca MacDonald and Anthony Melman.

Melman, 64, is a former managing director at Onex Corp. (TSX:OCX), where he was involved in several major corporate restructurings. He is currently chairman and CEO of Nevele Inc., providing strategic business and financial advice.

Colter, 66, is the president of CRS Inc., a corporate restructuring, strategic and management consulting company that he founded in 2002. Prior to that, Colter spent 34 years with KPMG Canada and its predecessor firm Peat Marwick Ltd. He has been a director of several Canadian companies.

Hilal, 45, is a partner at Pershing Square.

MacDonald, 58, is a founder and current executive chair of Just Energy Group Inc. (TSX:JE), a Toronto-based gas and electricity marketer.

Shares of CP and CN were down Tuesday, but so were stocks at most of the other Tier 1 North American railways.

On the Toronto Stock Exchange, CN shares dropped C$3.74, or 4.72 per cent, to $75.86, while CP's fell 90 cents, of 1.26 per cent, to $70.56.