Skip to main content

Bill Ackman is the founder and chief executive officer of Pershing Square Capital Management LP.EDUARDO MUNOZ

Canadian Pacific Railway, one must assume, is happy to move forward from the bruising proxy battle it's endured over the last few months.

But there's one hangover yet to come: The big earnings bath that's likely when CP does a full accounting of the costs of its tussle with William Ackman.

RBC Dominion Securities Inc.'s Walter Spracklin believes CP will take an earnings charge in the second or third quarter of "$80-million or more."

With 170 million shares outstanding, that could carve up to 50 cents off CP's earnings per share. (The company's first-quarter EPS was 82 cents.)

"Given the myriad of advisory fees, consultancy expenses, severance payments, signing bonuses and related retention expenses incurred in connection with the proxy battle, we believe CP is likely to recognize these costs early and all at once," Mr. Spracklin wrote in a research note published last week after Mr. Ackman's victory.

"However, the key is that we believe these costs to be largely viewed as non-recurring by investors and therefore should have little impact on the share price," he adds.

Mr. Spracklin says he believes CP will choose Hunter Harrison within the next few weeks, and "several changes" in the management team after that, "based on whether or not incumbent executives fully support the new CEO's strategy and objectives."

He says he "a certain sense as to who may stay and who may go," but is too circumspect to name names.

CP said it will disclose severance arrangements for former CEO Fred Green "in due course." According to the company's proxy circular, Mr. Green and most other top CP executives are eligible, in the event of termination without cause, for six months' base salary and an amount equal to their target bonus in the year they leave.