Canadian Pacific Railway CP
CP is the worst-performing Class I railroad under Fred Green; replacing him with Hunter Harrison — who transformed CN via Precision Scheduled Railroading — closes the peer gap and unlocks ~$140/share.
Thesis
Canadian Pacific is North America's worst-performing Class I railroad under CEO Fred Green: total shareholder returns of -18% since 2006, the highest operating ratio in the industry (81% vs. CN's 63%), a persistent 1,400-1,700 bps EBIT-margin deficit versus CN, declining market share, and roughly zero net cash flow over six years. Pershing Square, a 14.2% shareholder, argues CP's structural disadvantages are modest and the gap is a management failure — Green has cycled through five COOs in five years yet was deemed by the Board to have met 17 of 18 performance targets. The fix is to elect five new directors (the Nominees for Management Change) and install Hunter Harrison, who drove Precision Scheduled Railroading transformations at Illinois Central and CN, as CEO. A mid-60% operating ratio by 2015 implies intrinsic value of roughly $140 per share, versus the mid-$70s pre-campaign.
SCQA
Canadian Pacific is one of two Class I railroads in Canada, operating ~14,800 miles of track. It is 70% the size of peer Canadian National yet trades at only 40% of CN's enterprise value.
Under CEO Fred Green, CP has delivered -18% total returns since 2006, the industry's worst operating ratio (81%), persistent margin deficits to CN, and six years of zero net cash flow — yet the Board deems Green to have met 17 of 18 objectives.
Elect Pershing's slate of five Nominees for Management Change and install Hunter Harrison — who pioneered Precision Scheduled Railroading at Illinois Central and CN — as CEO to drive an operational and cultural overhaul.
A mid-60% operating ratio by 2015 implies CP's intrinsic value reaches roughly $140 per share within three years, versus a mid-$70s pre-campaign price — roughly 90% upside for shareholders.
The three reasons
- 1
CP has the worst operating ratio of any Class I railroad — 18 points behind CN
- 2
Under Fred Green, CP returned -18% vs. rail peers averaging +22% to +93%
- 3
Hunter Harrison's Precision Scheduled Railroading transformed IC and CN — same playbook works at CP
Primary demands
- Replace CEO Fred Green with Hunter Harrison
- Elect five Pershing-backed directors (the 'Nominees for Management Change') to the CP Board
- Adopt Precision Scheduled Railroading to close the operating-ratio gap to CN
- Refresh the Board with railroad, restructuring and shareholder-value expertise
KPIs cited
Pattern membership
Precedents cited
- Illinois Central transformation under Hunter Harrison (1989-1998)
- CN transformation under Hunter Harrison (1998-2009, Precision Scheduled Railroading)
- J.C. Penney (Pershing board influence, Ron Johnson hire)
- Pershing Square track record at Wendy's, Tim Hortons, McDonald's, Ceridian, GGP, Fortune Brands, Howard Hughes, Alexander & Baldwin
Composition what's on the 112 slides
Slide gallery ·
Notes
Canonical activist proxy deck, widely cited as a gold-standard specimen of the genre. Distinctive rhythm: sparse one-line statement slides (green/red 'questions to ask', 'the results?') interleaved with dense peer-gap charts, and a long Fred Green CEO-quote-contradiction sequence (roughly pages 55-68) juxtaposing management's confident forward guidance with subsequent underperformance. Core framing reduces the proxy contest to a binary: 'If CP had no CEO, whom would you hire — Fred Green or Hunter Harrison?' Five-seat slate includes three independent Canadian directors (Colter, MacDonald, Melman) plus Ackman and Hilal (proportionate shareholder representation). Sum-of-parts not used — the argument is operational alpha vs. peer, not break-up value.