Rail veteran Hunter Harrison has picked what the industry believes will be his successor at Canadian Pacific Railway Ltd. by hiring Keith Creel away from rival Canadian National Railway Co.
The move was widely expected, although it had been mired in a legal dispute between Mr. Harrison and his old employer CN.
As chief operating officer, Mr. Creel, 45, will take over a duty Mr. Harrison, 68, had performed himself while running CP since last summer. Mr. Creel has long been viewed as a protégé of Mr. Harrison, stemming primarily from Mr. Harrison's time as the head of CN from 2003 to 2009.
When Mr. Harrison was brought out of retirement to revitalize CP during the hard-fought proxy battle by Pershing Square Capital Management LP last year to change leadership of the company and improve performance, most industry watchers saw it as only a matter of time before Mr. Creel was brought over from CN.
Neither Mr. Creel nor Mr. Harrison were immediately available for comment on Monday. However, Mr. Harrison said in a press release that "I have worked with many talented operating people in this industry over the last four decades, and Keith is by far one of the best young operating talents that I have ever seen."
In the same statement, Mr. Creel said: "I am thrilled to be joining CP during this historic time in its turnaround story. I worked for Hunter for many years and am proud to be working alongside him once again."
Reporting to Mr. Creel are the three CP senior operations vice-presidents: Scott MacDonald, who leads operations systems, Guido De Ciccio, who runs Canadian operations, and Doug McFarlane, whos is in charge of U.S. operations. Chief marketing officer Jane O'Hagan and her departments also fall under Mr. Creel's purview.
The timing of his appointment was complicated by Mr. Harrison's difficulties with his former company. Before he was officially given control of CP, CN had discontinued Mr. Harrison's annual pension of reportedly $1.5-million and other payments, arguing that the former CEO had broken provisions of his retirement package by working with CP.
CN had litigation still outstanding that sought legal approval for cancelling his pension, totalling more than $20-million and nearly $18-million in restricted share units. Mr. Harrison's legal council, however, had argued that the CEO has honoured his non-compete agreement with CN. For instance, Mr. Harrison explained in an interview last autumn that he hadn't yet approached a potential successor because he was bound by contract not to solicit anyone from CN until the beginning of 2013. This delayed his ability to officially approach Mr. Creel.
On Monday, CN said it had reached a settlement with CP, which in turn allowed Mr. Creel's appointment. As part of the deal, CP cannot hire away certain other, unnamed CN employees until Dec. 31, 2016.
CN also said that it "has a deep bench of executive talent" from which to find a replacement for Mr. Creel and that his successor will be named shortly. One insider familiar with the situation noted that not all of those unnamed employees are in operations, but in other departments of CN too.
"The settlement arrived at today will allow CN and CP to focus on their respective agendas and create value for their customers and shareholders," CN's CEO Claude Mongeau said in a press statement Monday.