Pershing takes stake in Canadian Pacific

Pershing Square Capital Management, the activist hedge fund run by billionaire William Ackman, has built a 12.2 per cent stake in Canadian Pacific Railway, one of Canada’s most storied companies.

Pershing said in a regulatory filing that it expected “to engage in discussions” with Canadian Pacific about a wide swath of its business. Canadian Pacific declined to comment on Saturday.

CP shares are undervalued and an attractive investment, the Pershing fund said in a filing with the US Securities and Exchange Commission.

Canadian Pacific shares, which have under-performed those of other North American railway operators especially its chief rival Canadian National Railway, surged by 6.8 per cent to $64.57 in late trading on Friday following the filing. The company has a market value of about C$11bn.

Mr Ackman has often taken an activist approach to his investments, urging changes aimed at boosting shareholder returns. Other companies he has invested in over the past year include Fortune Brands, the maker of Jim Beam bourbon, and JC Penney, the department store chain.

He played a role earlier this year in the appointment of Ron Johnson, a senior Apple executive, as JC Penney’s chief executive.

Calgary-based Canadian Pacific operates a 22,000-km network extending across Canada, and 16 states in the mid-west and north-east US, centred on Chicago.

Its origins date back to 1881 when it was formed to build a railway linking Ontario and Quebec to the remote areas of western Canada and the Pacific coast. Any attempt by a foreign investor to gain a controlling stake in the company would be sure to meet strong political opposition in Canada.

Canadian Pacific’s third-quarter profit of C$186.3m, or C$1.10 a share, was below analysts’ expectations and C$10.5m lower than a year earlier.

Mr Ackman’s approach is not the first time that the company has drawn interest from an outside investor. It rebuffed an approach four years ago by Brookfield Asset Management, a Toronto-based real estate and infrastructure group.