Pershing’s William Ackman Says He’s Not Pressing for Canadian Pacific Sale

Date: Wednesday, November 2, 2011
Author: Natalie Doss, Bloomberg

William Ackman said he isn’t pushing for a sale of Canadian Pacific Railway Ltd. (CP) after his activist hedge fund Pershing Square Capital Management LP became the carrier’s biggest shareholder.

“We don’t think the company should be sold,” Ackman said yesterday in a telephone interview, while declining to lay out his strategy for the Calgary-based railroad.

Ackman’s comment gave the first insight into his thinking following New York-based Pershing’s Oct. 28 disclosure that it held a 12.2 percent stake in Canadian Pacific and would seek talks with management. While his history of prodding companies to boost returns spurred speculation that he might seek a sale, he said that isn’t his aim at Canada’s second-largest railroad.

“This is not a case where we’re pushing to sell the company,” he said. “We don’t think that’s a good way to optimize the outcome for shareholders.”

Ackman, 45, invests in companies he deems undervalued. In the past year, Pershing Square has bought stakes of more than 10 percent in Fortune Brands Inc., the maker of Jim Beam bourbon now known as Beam Inc. after a spinoff, and J.C. Penney Co., the third-largest U.S. department store chain.

Canadian Pacific is “open to the views of its shareholders,” the carrier told employees in a memo over the weekend. “We will speak with Pershing Square to hear their input into our plan, already targeted at realizing greater efficiency and improved service reliability.”

Ed Greenberg, a Canadian Pacific spokesman, has said the railroad isn’t commenting on Ackman’s investment.

Sale Speculation

Peter Nesvold at Jefferies & Co. and RBC Capital Markets’ Walter Spracklin were among the analysts who suggested this week that a sale of Canadian Pacific would be one possible outcome of Ackman’s investment.

The railroad’s U.S. shares jumped in late trading on Oct. 28 after Pershing Square’s filing. The Canadian shares rose 1 percent to C$62.22 yesterday in Toronto.

Pershing Square began building the stake in September, according to last week’s filing. The holding consisted of 20,659,504 common shares, including 2.65 million common shares through call options, the filing showed.

Canadian Pacific has lagged behind North American peers this year, falling 4.5 percent through Oct. 27, the day before Pershing Square’s stake was disclosed. Canadian National, the country’s largest railroad, climbed 20 percent in the same period, and Standard & Poor’s 500 Railroads Index of three U.S. carriers advanced 11 percent.

To contact the reporter on this story: Natalie Doss in New York at ndoss@bloomberg.net