A Canadian Pacific Railway freight train travels eastbound through the Canadian Rockies.

31 October 2011

Pershing Stake Could Signal Changes at Canadian Pacific Railway

New York New York USA - A major investment in Canadian Pacific Railway Ltd by hedge fund Pershing Square Capital Management could bring operational changes or put some or all of Canada's second largest railway in play.
 
Pershing, run by widely watched activist investor William Ackman, has acquired a 12.2 percent stake in the railway, according to a regulatory filing late Friday.
 
Pershing plans to discuss CP's "business, management, operations, assets, capitalization, financial condition, governance, strategy, and future plans" with the company and with other parties, the filing said.
 
Shares of CP slid last Tuesday after it released quarterly results. Shares were up 1.1 percent at $64.51 on Monday morning on the Toronto Stock Exchange.
 
Ackman has said he likes to take big stakes in public companies and work with management to improve their businesses.
 
Operational changes may prove difficult at CP because of its unionized workforce, regulation, and safety concerns, RBC Capital Markets analyst Walter Spracklin wrote in a note on Monday.
 
"We consider a sale of the company to a strategic player as unlikely. However, a sale to a Canada-based pension/infrastructure player would have significantly fewer impediments from a regulatory and political perspective, in our view," said the note.
 
Spracklin raised his price target to $80 from $66, predicting a "pile-on" of investors following Ackman's lead.
 
Reached on Friday evening, CP declined to comment on the Pershing Square investment.