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Freight trains in a rail yard in CalgaryJEFF MCINTOSH

It's one thing for an activist shareholder to buy a stake in a company, giving the shares an initial bump, and another to actually implement real changes to enhance shareholder value.

Bill Ackman is no rookie activist, but BMO analyst Fadi Chamoun notes that Mr. Ackman's firm, Pershing Square Capital Management, may not have many options when it comes to Canadian Pacific Railway .

For starters, Pershing does not have a history of acquiring its target companies, so that can probably be ruled out. CP also doesn't have much room for raising leverage, Mr. Chamoun noted, in large part because it has a big defined benefits pension plan.

On top of that, the chance of capturing some value from selling off assets like CP's excess real estate is "moderate at best."

"We believe that the most likely goal of Pershing Square is to benefit from CP Rail'sproductivity improvement opportunity and through greater shareholders engagement to perhaps help accelerate the realization of this opportunity," Mr. Chamoun noted. "We would not discount the possibility that Pershing would promote the idea that CP Rail abandons certain rail lines in the Eastern part of its network, which have subpar profitability."

However, he notes that CP has already communicated a road map for boosting operating margins from about 20 per cent to the high 20s within three to five years. "On the other hand, CP Rail has long struggled from an operational standpoint and a catalyst like this could prove to be a positive change agent for the company." So its kind of a mixed bag.

There is, however, a historical precedent. U.S. rail transportation company CSX Corp. had its own battle with activist shareholders -- The Children Investment Fund and 3G -- in 2006, and though the battle was drawn out for two and a half years, it gave CSX's management more reason to implement an operational improvement plan, and the stock is now up 87 per cent over five years.

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