Ackman's Pershing Square Closes Canadian Pacific Position

Aug 3 2016 | 9:31pm ET

Bill Ackman’s activist hedge fund Pershing Square Capital Management has closed its position in railway company Canadian Pacific, adding approximately $1.5 billion in dry powder for use in future investments. 

The sale was announced in a joint statement by Pershing Square and Canadian Pacific on Wednesday. The stake, which amounted to more than 9.8 million shares, represented 6.51% of the company. Ackman’s publicly traded Pershing Square Holdings, Inc. owned 4.04 million shares of the total, the statement said.

Pershing Square took its initial position in Canadian Pacific in 2011, and immediately embarked on a push to transform the business. In what ultimately became one of the most contentious proxy battles in the hedge fund industry, the activist manager won seven seats on the company's 16-member board in 2012, an early sign of Ackman’s persistence. From there, Ackman lobbied heavily for management changes, including bringing in railroad industry veteran Hunter Harrison as CP’s CEO, and backed an ultimately unsuccessful bid to buy rival Norfolk Southern.

The company’s turnaround since Ackman became involved has been impressive, with the share price more than tripling since Pershing first disclosed its involvement in 2011, and measures of operational efficiency at the railroad are at the best levels in years. 

Pershing had around 9.1% of Canadian Pacific until April of this year, when it trimmed the position by several percentage points. All told, Pershing Square earned some $2.6 billion on its investment, according to Reuters.

“Canadian Pacific has completed an incredible transformation since our initial investment in 2011,” said Ackman in the statement. “Hunter Harrison and Keith Creel have restored to greatness one of North America’s top railroads and have set the company on the path to continued success.” Ackman will continue to serve on Canadian Pacific’s board of directors until the next annual meeting. 

Closing the Canadian Pacific position notches a win for Ackman at a time when he and his firm are most widely known for dramatic losses on a long bet on Valeant Pharmaceuticals and a short position on Herbalife. 

Earlier this week, Pershing Square released July 2016 returns of 2.7%, which narrowed year-to-date losses to -19%. 

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