Hunter Harrison is leaving Canadian Pacific Railway Ltd. more than five months ahead of schedule, and the bombastic 72-year-old executive appears to be vying for a job at a major U.S. railroad.
CP surprised investors Wednesday evening with the announcement that the Memphis-born Mr. Harrison has severed "substantially all" financial ties to the company, giving up pension, benefits and stock worth $118-million. Mr. Harrison will lose the chief executive title on Jan. 31, and will be on vacation until then, the company said.
The Wall Street Journal reported that Mr. Harrison is joining forces with an activist investor in a bid to change the management at CSX Corp., a railway based in Jacksonville, Fla. It was under similar circumstances that he became the CEO at CP in 2012. Pershing Square Capital Management, a U.S. hedge fund, waged a successful proxy fight with the board for control of the underperforming company, the smaller of Canada's two big railways.
The Journal reported that Mr. Harrison's partner in the CSX play is Paul Hilal, a former Pershing Square employee who has started his own activist investing fund.
Mr. Harrison's heir apparent at CP, chief operating officer Keith Creel, will assume the top job at the Calgary-based company.
Mr. Harrison, who was due to retire at the end of June and become a consultant to the company at $1-million a year, had asked the board to change his retirement plan so he could "pursue opportunities involving other Class 1 railroads," CP said in a statement.
CP's board sought legal advice and set up a special committee, which recommended that the company "enter into a separation agreement" with its CEO.
Mr. Harrison was not on the company's fourth-quarter analyst conference call held Wednesday evening, and chairman Andrew Reardon told analysts not to ask about the departed chief.
Mr. Harrison has been credited with turning around a number of North American railroads, including Canadian National Railway Co., where he was a senior executive for more than a decade and CEO from 2003 to 2009. Since taking over at CP about five years ago, he has parked hundreds of locomotives and rail cars, slashed about 5,500 jobs and improved the company's efficiency.
On his watch, there have been two strikes by locomotive operators, represented by Teamsters Canada Rail Conference. The share price, meanwhile, tripled. He also led two failed attempts to merge with U.S. rivals -- CSX and Norfolk Southern Corp.
CP employs 11,750 people in Canada and the United States, according to recent company reports, down 2,000 from a year earlier.
Mr. Creel, a former U.S. army officer in his late 40s, has worked under Mr. Harrison for more than 20 years, including at CN. Mr. Reardon called it a "textbook mentoring" between the two most talented railroaders in the business. Mr. Creel said he had mixed emotions about about his rise to the top job coming early, but said his team has been in place since the summer. "He's taught me the business," Mr. Creel said Wednesday. "This team is prepared for this transition."
The news of Mr. Harrison's retirement came as the company posted fourth-quarter results.
Fourth-quarter revenue fell by 3 per cent to $1.64-billion from $1.69-billion and adjusted earnings per share rose 12 per cent to $3.04, the company said. Analysts had been expecting a profit of $3.12 a share (a 15-per-cent rise) and revenue of $1.65-billion.
For both major Canadian railways, the number of carloads hauled on their U.S. and domestic networks fell by almost 5 per cent, led by declines in petroleum (down 16 per cent), non-metallic minerals (down 11 per cent) and coal