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Bill Ackman, CEO of Pershing Square Capital Management (Pawel Dwulit/THE CANADIAN PRESS)
Bill Ackman, CEO of Pershing Square Capital Management (Pawel Dwulit/THE CANADIAN PRESS)

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How Bill Ackman drove in the last spike at Canadian Pacific Railway Add to ...

These are stories Report on Business is following Thursday, May 17, 2012. Get the top business stories through the day on BlackBerry or iPhone by bookmarking our mobile-friendly webpage.

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CP board buckles The board and management of Canadian Pacific Railway Ltd. buckled at the 11th hour today, heading off what was shaping up to be a humiliating defeat in a proxy battle in Calgary.

Fred Green is stepping down as chief executive officer, while several board members, including chairman John Cleghorn, said they would not stand for re-election, The Globe and Mail's Jacquie McNish, Brent Jang and Nathan VanderKlippe report.

"This decision was made after taking into account the views expressed by shareholders about the desire for board change," Canada's oldest railway said in a statement.

The dramatic turn of events came just hours before what would have been the climax of one of the greatest proxy battles ever waged in Canada.

One of the country's blue-chip boards was facing activist investor Bill Ackman of Pershing Square Capital Management, who has become the railway's biggest shareholder and has been pushing for massive change, including the replacement of Mr. Green with Hunter Harrison, the former chief of rival CN.

Mr. Ackman had won widespread support for his dissident slate of shareholders, and never let the pressure on the board ease, gaining support from major players day after day.

The board responded at every move, urging shareholders to support the status quo until today. Of course, CP shareholders have already gained from the fight, given the run-up in the share price since Ackman became the biggest stockholder.

I'm not surprised that the board caved, only that it waited until the last minute.

The focus now turns back to the operational issues at the railway.

"We continue to believe that most of the operational upside is already priced into the shares at current levels," said analyst Benoit Poirier of Desjardins.

"As a result, we maintain our Hold--Average Risk rating on CP. We currently prefer CN over CP - there is more potential upside to CN’s share price at current levels and CN has more growth opportunities and a stronger balance sheet."

When all was said and done today, they all said the right things, though bitter feelings must remain no matter what was said, given the intensity of the fight.

"We came in peace, and I’m delighted to say that we’re at peace once again," Mr. Ackman said. "Proxy contests are never fun for anyone involved, but they're critical to the proper functioning of the capital system."

RBC eyes wealth unit Royal Bank of Canada is among the financial institutions bidding to pick up parts of the wealth management business of Bank of America , The Globe and Mail's Tara Perkins reports today.

The bank has for a number of years been looking to expand its global wealth management operations, and has been on a regular hunt for acquisitions. In 2010 it paid $1.6-billion for U.K.-based Blue Bay Asset Management.

Aside from Europe, executives have recently said that RBC has also been looking to buy operations in Asia. The assets that Bank of America is looking to sell include businesses in both those regions, as well as the Middle East and Latin America.

Wealth management businesses have become particularly appealing to banks and other financial institutions since the financial crisis, in large part because they require less capital to back them up.

Imperial weighs refinery future Canada's Imperial Oil Ltd. is looking to sell its almost century-old Dartmouth refinery.

"We recognize the refinery’s long history of supplying customers in this region and we know that these jobs are important to the community," said chief executive officer Bruce March.

"We are grateful of the relationship we have built with the community, our customers, and suppliers, and we recognize the potential for uncertainty that this evaluation may create."

Imperial said it would put the refinery, and the associated supply terminals, on the auction block, while also considering simply converting it to a terminal.

Citing "signficant global competition" in the Atlantic region, it plans to decide by the first quarter of next year, The Globe and Mail's Shawn McCarthy reports.

The refinery began operating in 1918. Its capacity is some 88,000 barrels a day, creating several products, including gasoline, diesel, jet fuel, home heating fuel.

The terminals are in the Nova Scotia centres of Dartmouth and Sydney, Corner Brook in Newfoundland and Labrador, Sept-Ilses, Quebec, and Cap aux Meules in the Magdalen Islands.

Sears cutting stake in Canada Sears Holdings Corp. may be on the verge of a retreat from Canada.

Sears said in a statement today it plans to spin off a huge chunk of stake in its publicly traded subsidiary, Sears Canada Inc. , reducing its ownership to about 51 per cent from 95 per cent.

After that, the parent company could sell even more, The Globe and Mail's Marina Strauss writes.

Sears Canada has been a laggard. Just today, the parent reported that the Canadian operation's same-store sales, a key measure in the retail industry, slipped 6.3 per cent in the first quarter of the year.

"Holdings believes that the spin-off will permit each of Sears Canada and Holdings to focus on their respective businesses and allocate resources to best optimize returns on assets employed," the parent company said in a statement.

Many observers had believed Sears would go in the other direction, and move to take the Canadian unit private.

"While all options to realize value from Sears Canada still remain open to Sears Holdings, it appears to us that the new executive management of Sears Canada has been granted at least a couple of years to establish if its plan can turn operating results around," said analyst Keith Howlett of Desjardins.

"This was not necessarily what minority investors in Sears Canada had expected. However, it should boost management and employee morale as the organization girds itself for battle with Target, Lowe’s and Wal-Mart."

Spain in the headlights The focus of the euro crisis is back on Spain, where the economic outlook is ever bleaker and where one of the country's major banks is being slaughtered in the market.

Bankia, the financial institution partly seized by the government last week, suffered heavily in the market today amid reports that depositors are pulling out. Spain denied this, and the shares regained some ground.

That's similar to the situation in Greece, where depositors have also fled, as The Globe and Mail's Barrie McKenna writes today in Report on Business.

Spain did pull off a succesful debt auction today, though it's questionable how much solace that provides.

"In a wider context, Spanish bonds are now trading with quite high yields: Generic three-year paper is yielding 4.9 per cent, up from a low of 2.7 per cent in early March," said Derek Holt and Dov Zigler of Scotia Capital

"That is more of a move than what we’ve seen in the Spanish 10-year sector, where yields have increased from 4.9 per cent in early March to 6.3 per cent today," they said in a research note.

"Curve flattening at higher yields is disconcerting as it implies something irrational: Higher risk premia for shorter term bonds than longer term ones (inflation expectations have not changed markedly and in fact inflation is lower now than it was in March). That is the same type of move that occurred in the run-up to wider stresses in Europe during 2010 and 2011, with the yield curves of the weakest countries even inverting in some places."

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