Ivey Publishing
Unlocking Value At Canadian Pacific: The Proxy Battle With Pershing Square
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18 pages (7 pages of text)
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Case (Pub Mat)
A principal at the hedge fund GBR Capital needed to determine how best to vote her fund’s shares in the upcoming annual shareholders' meeting for Canadian Pacific (CP). For the previous decade, CP’s shares had underperformed compared to its key Canadian rival, Canadian National Railway (CN). The key difference appeared to be CN’s chief operating officer, who later became CN’s chief executive officer. He was able to cut costs, which boosted CN’s profits. In October 2011, Pershing Square, a hedge fund, acquired a 12.2 per cent stake in CP, investing a total of CA$1.1 billion, and proposed appointing CN’s chief executive officer as CP’s new chief executive officer. The principal at GBR Capital needed to investigate and quantify the extent to which an activist investor could unlock value in an under-performing firm.
Learning Objective:
This case has been designed for use in undergraduate and graduate finance courses, and in strategy courses to discuss corporate governance as well as the following topics: introduction to valuation methodologies; evaluating a turnaround opportunity; corporate governance and control issues; developing financial estimates under various scenarios; and discounted cash flow analysis. After completion of this case, students will be able to
  • understand the importance of operating efficiency;
  • understand the role of boards, corporate control issues, and proxy battles;
  • understand the role of activist investors;
  • conduct an assessment of a firm’s current strategy and future prospects;
  • undertake a valuation of a firm based on relative valuation methods, and discounted cash flow analysis;
  • estimate investor return through IRR calculations; and
  • assess the impact of various assumptions on intrinsic value calculations, in particular on key drivers to unlocking value.
    Transportation and Warehousing
    Canada, Large, 2012
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    Associated Materials
    Supplements: 7B17N024 (68 KB)
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