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Bill Ackman of Pershing Square Capital Management gestures as he speaks during a Pershing Square Capital Management town hall meeting for Canadian Pacific Railway shareholders meeting in Toronto on Monday, February 6, 2012.

Pawel Dwulit/Pawel Dwulit/THE CANADIAN PRESS

Investors hoping to ride the coattails of activist shareholder Bill Ackman, who is agitating for change at Canadian Pacific Railway Ltd. , may want to think twice.

Even within the private equity community, the outcome of New York-based Pershing Square Capital Management's fight for control of embattled CP remains in doubt.

Eric Rosenfeld, the president and chief executive officer of Crescendo Partners L.P., says Mr. Ackman is likely to prevail in his quest for change, but it will depend on how many board seats he ultimately wins.

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Mr. Rosenfeld is a veteran activist shareholder. Since 1998, he has led Crescendo, also based in New York, into 20 corporate battles, winning board seats on all but two of the companies. Among his Canadian-based targets have been Spar Aerospace Ltd., Cott Corp. and Dalsa Corp.

"When you make the issue about the CEO, it becomes very black and white," Mr. Rosenfeld said of Pershing Square's efforts to oust CP's CEO, Fred Green. One or two board seats will not be enough for Mr. Ackman to change the company's top management, he added.

CP recently agreed to nominate Mr. Ackman as one of 16 members of its the board, but the activist shareholder is proposing his own slate of six alternative directors, including himself. He argues that CP has been a laggard among North America's Big Six railways.

The story line of Canada's rail saga, which began last fall when Pershing Square acquired a 14.2 per cent stake in CP, is far from complete and could see a negotiated settlement or even an attempt by CP to put itself up for sale, Mr. Rosenfeld speculated.

However, Brian Gibson, senior vice president of public equities at Alberta Investment Management Corp. (AIMCo), says it has become very difficult for CP's board to make the right decisions now that it finds itself under intense media scrutiny.

"I wouldn't have approached this the same way [as Pershing Square]" Mr. Gibson said. "CP has been underperforming for a long time. Most directors want to do the right thing, but if [shareholder activism]is being done in the newspaper, it becomes very hard for people to make the right choices."

The two private equity managers made their remarks at a luncheon held by the Toronto CFA Society and Concordia University's Goodman Institute of Investment Management.

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Mr. Gibson eschewed the aggressive activism that defines many New York private equity firms. AIMCo - an Alberta Crown corporation that manages provincial public sector pension plans and endowment funds - achieves the most effective outcomes by working with boards and avoiding battles conducted in the media, he said.

"If you are going to have tough discussion, it's best to have them behind closed doors."

Fights conducted in the open can be particularly problematic in Canada, where the small market ensures they receive lots of public scrutiny, he added. Recent Canadian investments by AIMCo have included Precision Drilling Corp. and Viterra Inc.

In contrast, Mr. Rosenfeld presented a more pugnacious style, outlining Crescendo's success over the years using dramatic proxy battles and legal challenges.

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