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Canada's rail industry has long had the air of an old boys' club. But with the arrival of Bill Ackman and the return of Hunter Harrison, it's starting to look more like a bare-knuckle boxing club.

Mr. Harrison, the Canadian Pacific Railway CEO who was lured out of semi-retirement by U.S. activist investor Mr. Ackman to inject new life into a sputtering CP, on Monday reached into the senior ranks of his former employer and now chief rival, Canadian National Railway, to pluck his new chief operating officer and likely successor. Keith Creel was a protégé of Mr. Harrison's when the latter headed up CN in the 2000s, and was CN's COO prior to the announcement.

While in some industries the poaching of top talent from competitors is common practice, Canada's railway business has long steered clear of such messy dealings, at least at the top ranks. While an executive might be imported from a U.S. railway from time to time, it has been all but unheard of for one of the Canadian railways to grab a top executive away from the other. The two firms have often operated more like friendly neighbours than chief competitors, sharing track and co-owning a telecommunications company.

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But CP has been shocked into the 21st century of doing business by Mr. Ackman, whose activist hedge fund seized control of the company's board and installed Mr. Harrison as its hand-picked CEO, despite CN's legal claims that it was in violation of a non-compete clause in place from Mr. Harrison's 2009 retirement. Mr. Harrison's plans to revamp CP have made it clear that aggressive change is now the norm – and the hiring of Mr. Creel away from CN has served notice that this new aggressiveness includes going toe-to-toe with its national rival.

From a business standpoint, the time to play hardball is at hand. There's a lot of new money potentially up for grabs between the two rail operators – a suddenly surging demand for moving mass quantities of Western Canadian oil by rail, the most expedient solution to get swelling Western Canadian crude supplies to markets underserved by existing pipeline capacity. A railway that can move swiftly and nimbly on the energy transportation problem could lock up a substantial growth business for, potentially, years to come, while those slow off the mark could find themselves crowded out. This is no time to be timid.

As part of its settlement with CN over the legal dispute involving Mr. Harrison's non-compete restrictions, it appears CP was able to secure Mr. Creel in exchange for agreeing to leave other CN executives alone until the end of 2016. It seems a more than fair tradeoff for CP. In taking CN's top operations man, CP got someone with proven talents for implementing an aggressive turnaround, as well as be its leader in the not-too distant future. (Mr. Creel is 44 years old; Mr. Harrison will be 69 this year.) In the process, it delivered a setback to its main rival, at a critical time.

And in accepting the settlement, CN is essentially acknowledging that there's a new kind of rival emerging – one that wants its best people and its best business, and isn't going to be particularly polite about it. It may look like a peace treaty, but in fact it's recognition that the war is on.

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About the Author
Economics Reporter

David Parkinson has been covering business and financial markets since 1990, and has been with The Globe and Mail since 2000. A Calgary native, he received a Southam Fellowship from the University of Toronto in 1999-2000, studying international political economics. More

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