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[CNJRoss]

The Street 1/18:
 

Canadian Pacific CEO's Early Exit Sends CSX Shares Soaring

 

The Canadian railroad reported earnings that missed expectations, but the real intrigue came from the announcement that CEO Hunter Harrison would retire early.

 

 

Canadian Pacific Railway (CP) late Wednesday reported earnings that missed expectations, but the real intrigue came with the railroad's announcement that its CEO would leaving early and could be headed to a competitor.

 

Calgary-based CP said that fourth quarter adjusted earnings per share came in at C$3.04, compared to the FactSet consensus estimate of C$3.12. The company also said that E. Hunter Harrison, who was brought in as CEO in 2012 by activist Bill Ackman, would retire ahead of schedule and be replaced by chief operating officer Keith Creel.

 

Harrison's abrupt departure rippled through the railroads, causing an after-hours spike in shares of rival CSX (CSX) .

 

Harrison, 72, had previously planned to retire in July, but the early move makes it sound like he is not done with the industry. CP said as part of the early separation it has agreed to a limited waiver of the executive's non-competition obligations in return for Harrison agreeing to terminate all roles with the company and forfeit "substantially all benefits" he was entitled to, including his pension, and cancel all vested and unvested equity awards.

 

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[CNJRoss]

CP news release:

 

Keith Creel to become CEO of Canadian Pacific; E. Hunter Harrison to retire

January 18, 2017 Calgary, AB

 

 

​​​​​​​Canadian Pacific Railway Limited (TSX: CP) (NYSE: CP) announced today that Keith Creel will become President and Chief Executive Officer of the company effective January 31, 2017 following E. Hunter Harrison's decision to retire from CP.

 

Mr. Harrison will take vacation leave effective immediately until January 31, 2017, and Mr. Creel will assume the CEO's responsibilities during this period.

 

"Hunter has made enormous contributions to CP, and we are forever grateful for his years of service," said Andrew F. Reardon, Chairman of the Board. "We have a tremendous CEO-in-waiting in Keith Creel. Keith and his team are ready to formally take the reins."

 

"Leaving CP is bittersweet," said Mr. Harrison. "I have had a wonderful experience and depart with many friends and with full confidence in Keith's ability to build on the great success we have enjoyed."

 

Mr. Harrison had approached the Board to discuss his retirement from CP and potential related  modifications  to his employment arrangements that would allow him to pursue opportunities involving other Class 1 Railroads.  A special committee of the Board oversaw discussions with Mr. Harrison. Following negotiations, receipt of independent legal advice, and careful deliberation, the special committee recommended to the Board that CP enter into a separation agreement with Mr. Harrison.

 

Under the terms of the separation agreement, CP has agreed to a limited waiver of Mr. Harrison's non-competition obligations.  In consideration of the waiver Mr. Harrison has agreed to terminate all roles he has with CP and forfeit substantially all benefits and perquisites he is entitled to receive from CP going forward, including his pension. In addition, Mr. Harrison has agreed to surrender for cancellation all of his vested and unvested equity awards, except for a portion of his vested options he was granted upon arrival at CP in June 2012. The total value of benefits and awards forfeited by Mr. Harrison is approximately C$118 million, with the value of the equity awards surrendered calculated based on their in-the-money value relative to the current trading price of CP's shares.

 

The previously-agreed consulting agreement between CP and Mr. Harrison will not take effect and Mr. Harrison will not be providing any consulting or other services to CP following his retirement. CP has also reinforced Mr. Harrison's non-solicitation obligations with respect to senior CP employees. Mr. Harrison has agreed to sell all of his CP shares by May 31, 2017. CP will have no role in Mr. Harrison's future endeavours.​

 

 

[CNJRoss]

Bloomberg News, 1/18:
 

Departing CP Rail CEO and Activist Said to Take Aim at CSX

 

 

Hunter Harrison, the outgoing chief executive officer of Canadian Pacific Railway Ltd., is teaming up with activist investor Paul Hilal to target CSX Corp., according to a person familiar with the matter.

 

The pair is likely to push to install Harrison in a leadership position at the U.S. railroad, said the person, who asked not to be identified because the matter is private. Hilal worked for years with billionaire hedge fund manager Bill Ackman before starting his own fund.

 

Harrison, 72, is stepping down from Canadian Pacific months ahead of schedule and forfeiting C$118 million ($89 million) in benefits, the company said Wednesday. A separation agreement gives him a “limited waiver” of his non-competition obligations.

 

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[CNJRoss]

Progressive Railroading, 1/19:
 

Report: Harrison to retire early from CP to pursue CSX takeover

E. Hunter Harrison will retire as chief executive officer of Canadian Pacific effective Jan. 31, five months ahead of schedule so that he can "pursue opportunities" at other Class Is, CP announced yesterday.

Reports in the Wall Street Journal and MarketWatch today said Harrison is completing an agreement to join with activist investor Paul Hilal in an attempt to shake up management at CSX Corp.

 

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[CNJRoss]

Calgary Herald, 1/20:
 

Larger-than-life Harrison a polarizing figure who leaves mixed legacy at CP Rail

 

 

A railroading genius who — in a stunningly short time frame — turned around the flagging fortunes of a struggling company.

 

A hard-nosed boss who created a “culture of fear” in the workplace, slashing costs and cutting staffing numbers to the bone.

 

An outspoken, larger-than-life personality who brought his brash American style to Canada, and had no qualms about speaking bluntly to governments, unions and customers alike.

 

Depending on who you talk to, each of these statements could be an accurate description of outgoing Canadian Pacific Railway CEO Hunter Harrison. The 72-year-old is a polarizing figure, admired and loathed in seemingly equal parts.

 

There’s no denying Harrison — whose departure from CP, reportedly to take on an opportunity at a competing railroad, was abruptly announced this week — was one of the most interesting personas to ever head up a Calgary-based company, though he leaves a decidedly mixed legacy in his wake.

 

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[CNJRoss]

Fortune, 1/23:
 

Can a 72-Year-Old Railroad Legend Do It Again With CSX?

 

 

Can a legendary 72-year-old executive who's revived three troubled railroads, and who was on the verge of retiring for a second time, add boxcars of profits at America's third largest carrier?

 

On January 19, Hunter Harrison, the septuagenarian CEO of Canadian Pacific (cp, +0.85%), announced that he'll depart in less than two weeks, months ahead of his scheduled retirement on June 30. Press accounts, including an article in the Wall Street Journal, reported that Harrison was teaming with activist investor Paul Hilal to seek the top job at CSX. CSX is the nation's largest east coast railroad, and third-ranking nationwide behind two western carriers, Union Pacific (which Fortune profiled in this 2015 feature) and Berkshire Hathaway's Burlington Northern.

 

Harrison apparently wants to steer CSX (csx, +3.74%) so badly that he sacrificed $89 million in equity grants—money that he would have pocketed after June 30—in exchange for a release from non-compete restrictions that would have blocked him from running a rival.

 

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[CNJRoss]

Financial Post, 1/24:
 

Someone just hired Hunter Harrison for $100 million — and there’s an excellent reason why

 

In an unexpected turn of events, Canadian Pacific Railway announced the early departure of its CEO, Hunter Harrison, a few minutes before a conference call planned for analysts on Jan. 18. Instead of retiring as planned, Harrison leaves CP at age 72 for a new challenge, running another railway company (almost certainly CSX) on behalf of Mantle Ridge LP, a newly established hedge fund run by Paul Hilal. In his prior role at Pershing Square Capital, Hilal was instrumental in backing its investment in CP and installing Harrison’s management team.

 

SNIP

 

What makes Hunter Harrison so valuable?  .  .  .

 

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[CNJRoss]

CP news release:

 

 

.  .  .  Mr. Harrison has agreed to sell all of his CP shares by May 31, 2017.  .  .  .

 

 

The Globe and Mail, 1/26:
 

Hunter Harrison sells CP Rail shares for $35-million

 

 

Hunter Harrison has sold his shares in Canadian Pacific Railway Ltd., shortly after quitting as chief executive officer of the Calgary company to pursue the top job at Florida-based railway CSX Corp.

 

Mr. Harrison has sold 178,617 CP shares owned by him and his wife at $150.80 (U.S.) each for a total $26.9-million ($35.3-million Canadian), according to a filing with the U.S. Securities and Exchange Commission.  .  .  .

 

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[CNJRoss]

Seeking Alpha, 1/29:
 

CSX: The 11 Billion Dollar Man

 

Summary
 

*Value of the company has increased $11 billion on the Harrison news.

*The "Harrison Premium" already priced into the shares.

*Shares of CSX are about 31% more expensive than average PE of other Class 1 Rails.

*More value in other Class 1 Rails at much less risk.

 

 

E. Hunter Harrison is certainly a legend in railroading.

 

He is two time winner of Railway Age's "Railroader of the Year" (more impressive than it sounds), and he is the man who, while at Canadian National (NYSE:CNI), introduced such revolutionary concepts as "just in time railroading", "double-stacking", and a host of other measures that made that railroad one of the most efficient in the industry. He also had a great strategic sense, because it was Harrison who purchased the Elgin, Joliet, & Eastern Railway. This has allowed Canadian National to avoid the efficiency killing bottlenecks presented by the city of Chicago. The fact that he is going to be taking over at CSX Corp. (NYSE:CSX) caused shares to spike recently, and in my view, investors who are considering buying now are making a mistake.

 

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[CNJRoss]

Reuters, 1/29:

CSX, outgoing Canadian Pacific CEO in settlement talks - WSJ

 

 

Jan 29 U.S. railroad operator CSX Corp is discussing a settlement with Hunter Harrison, the outgoing chief executive of Canadian Pacific Railway Ltd, and activist investor Paul Hilal that could make Harrison CSX's CEO, the Wall Street Journal reported.

 

The talks come less than two weeks after Harrison partnered with Hilal's new fund, Mantle Ridge LP.

 

The parties are discussing Mantle Ridge's request for more than three CSX board seats, but CSX is said to be unwilling to hand over that many seats, WSJ reported, citing people familiar with the matter. on.wsj.com/2khOUIX

 

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