Q4 one to forget for US rail operator CSX, but Canada's CPR breaks records
The closing quarter of 2017 will be one to forget for US rail operator CSX: ...
Hunter Harrison has retired as Canadian Pacific’s (CP) chief executive. He has handed back $90m in benefits to be freed from a non-compete clause, clearing a path to a much-speculated move to US railroad operator CSX.
Mr Harrison’s shock decision to step down took effect yesterday, after he’d approached the board to discuss retirement and contract modifications that would allow him to pursue opportunities with other carriers.
“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 CP statement said.
Under the terms of the agreement, Mr Harrison agreed to terminate all roles and forfeit substantial benefits, including his pension.
Following the announcement of his resignation the rumour mill went into overdrive with news sources suggesting he would be making a move to CSX.
Earlier in the week, The Wall Street Journal reported that Mr Harrison had met with members of the CSX board in Atlanta to discuss an agreement that would see him appointed chief executive, though this meeting remained unconfirmed by the carrier.
Reports from Reuters suggested activist investor Paul Hilal, whose Mantle Ridge fund had raised $1bn for a stake in CSX, was championing the appointment.
The news buoyed CSX investors, with the Financial Post quoting TD Securities analyst Cherilyn Radbourne: “We recognise that Mr Harrison has developed a unique reputation among investors for being able to effect positive change, even in the face of structural limitation.”
CP chairman Andrew Reardon said Mr Harrison had left a strong foundation for the carrier’s future success.
Renowned as the man that turned around the post-privatisation fortunes of Canadian National, Mr Harrison joined CP in 2012 after an approach from activist investor Bill Ackman.
At the time, Mr Ackman’s Pershing Square Capital had recently won a shareholder proxy battle and he was looking for a chief executive to address 80% operating costs, at the time the worst in North America.
Once again, Mr Harrison worked his magic and reduced costs by more than 14% through a series of measures including the removal of 450 locomotives and 10,000 railcars from the carrier’s fleet.
Should Mr Harrison’s move to CSX be confirmed, this would not be the first time he’d flirted with the US carrier, having placed an ultimately doomed bid to merge CP with CSX in 2014.
That move launched a quest to create a transcontinental carrier that then led to a $28bn bid for Norfolk Southern in 2015, which, had it succeeded, would have been one of the largest railroad mergers ever.
However, a combination of NS’s dissatisfaction with the proposed offer and its insistence that the US Surface Transportation Board would never greenlight the move led to it being aborted last April.
Keith Creel has been promoted from chief operating officer to replace Mr Harrison at CP.