By Solarina Ho and Euan Rocha
TORONTO Feb 4 Hunter Harrison, brought in to
engineer a turnaround at Canadian Pacific Railway, has
tapped a former protege as the company's president and chief
CP said on Monday that Keith Creel would join on Tuesday
from Canadian National Railway,, the railroad that
Harrison had previously run.
Creel, who is widely expected to succeed Harrison eventually
at the helm of CP, was previously executive vice president and
chief operating officer at CN Rail - a job he had held since
Harrison became CP's chief executive officer last year after
a bruising proxy battle led by William Ackman's Pershing Square
Capital Management Ltd, the U.S. hedge fund that is the
company's largest shareholder, with a stake of about 14 percent.
Harrison, Ackman's preferred candidate for the job, turned
CN into North America's most efficient railroad during his
period as CEO, and it had been widely expected that he would ask
Creel to follow him to CP.
"Creel would be a natural successor," said Morningstar
analyst Keith Schoonmaker. "Who better to execute Hunter
Harrison's operating plan than the chief operating officer that
he groomed to do it at another railroad that also has operations
in Canada and the U.S.?"
Harrison has already hinted that the railroad's next COO
could be its next boss. Last fall he told analysts that his time
at CP would not be "a long journey" and that he only planned to
stay at the helm for three to five years.
"Obviously the selection of a COO would be some indication
that here's the next successor, if they don't blow it," Harrison
said at the time.
Harrison's push to turn CP's worst-in-class operating
efficiency around through sweeping job cuts, new labor deals,
shutting down inefficient operations and shelving a costly
expansion has already resulted in profit forecasts that exceed
CP's former COO, Mike Franczak, resigned in October, just a
few months after CEO Fred Green and Chairman John Cleghorn quit
following the proxy battle.
"Creel is a highly regarded rail operations executive so we
view his addition to CP's executive team as unambiguously
positive," National Bank Financial analyst Cameron Doerksen said
in a research note.
CN Rail confirmed Creel's departure in its own press release
and said it would soon announce a replacement.
CN, Canada's biggest rail carrier, also said it had reached
a settlement with CP and Harrison over a lawsuit filed more than
a year ago. In the lawsuit, CN accused Harrison of breaching
noncompete obligations when he joined CP.
As part of the settlement, CP will not hire certain CN
employees until after Dec. 31, 2016, CN said, adding that
additional terms of the settlement were confidential.
Analysts did not expect Creel's departure from CN to affect
"We view this as a positive to both companies as it
eliminates a distraction for CP's current CEO and it reduces
further 'poaching risk' for CN out to 2017," RBC Dominion
Securities analyst Walter Spracklin said in a research note.
CP shares, which have surged more than 50 percent since
Harrison took the reins, were off 1.7 percent at C$113.82 in
midday trading on the Toronto Stock Exchange, while CN was down
0.3 percent at C$95.40.