September 27, 2012
The bruising proxy battle earlier this year between shareholder activist Bill Ackman and Canadian Pacific Railway Ltd. for control of the company’s board cost a staggering $32-million. While that’s a big figure for proxy fights in Canada, it’s chump change, compared with what Mr. Ackman and his company Pershing Square Capital Management LP would have paid in a takeover fight for control of Canada’s second-largest railway. With a market cap last September of about $8-billion, a takeover would have been a costly venture to finance and shareholders would have expected a sizable premium.
Instead, Mr. Ackman, CP’s largest investor, spent $15-million to win the proxy battle, which effectively gave him control of the board and the ability to appoint a management team favourable to his position. CP spent $17.5-million defending the fight.
Sharon Geraghty said one factor to the rise in proxy activity is that “there is a number of large financial institutions prepared to get involved in these things now.” Pension funds such as the Ontario Teachers’ Pension Plan and the Canada Pension Plan, which both backed Ackman, are getting more aggressive with underperforming boards. “The likelihood of a Canadian [board] stiff-arming an activist is declining.”
As well, she said, investors in other countries are waking up to the fact that Canadian boards and companies have “fewer tools to stop activists. It’s easier to withstand this kind of charge in the U.S. There are more tools at hand.”
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