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UPDATE 1-Ackman exits Canadian Pacific, freeing up cash for next bet

Published 2016-08-03, 06:50 p/m
© Reuters.  UPDATE 1-Ackman exits Canadian Pacific, freeing up cash for next bet
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(Recasts with sale of shares completed and cash freed up for other investments; adds background)

By Svea Herbst-Bayliss and Allison Lampert

BOSTON/MONTREAL, Aug 3 (Reuters) - Billionaire investor William Ackman has exited his hedge fund's investment in railway company Canadian Pacific CP.TO , freeing up roughly $1.5 billion in cash to make other future investments.

Pershing Square (NYSE:SQ) Capital Management and Canadian Pacific Railway Ltd on Wednesday said the New York-based hedge fund had sold its remaining 9.8 million shares in the Canadian railroad, representing a 6.51 percent stake, through trades organized by J.P. Morgan, Credit Suisse (SIX:CSGN) and BofA Merrill Lynch.

The sale marks the end of one of Ackman's most profitable and successful investments, but comes at a time the prominent activist investor is facing double-digit losses in his highly concentrated investment portfolio.

Pershing Square began buying into the under-performing railroad around late September 2011 and mounted one of the hedge fund industry's bitterest and most closely watched proxy battles, only to win seven seats on the company's 16-member board in 2012. In the end, Pershing Square earned some $2.6 billion on its investment, and Ackman privately said winning the board contest would ensure that no company in the world could afford to ignore his firm.

Ackman said he plans to keep his board seat until the company's next annual meeting. Earlier this year, Paul Hilal, a key architect of the investment, resigned his CP board seat when he left Pershing Square.

Pershing Square sold down its stake in Canadian Pacific earlier this year but told investors later that it still had full confidence in the railway's management. Late last year, Ackman played a key role Canadian Pacific's efforts to buy rival railroad Norfolk Southern (NYSE:NSC) NCS.N , an effort that eventually collapsed.

While Canadian Pacific will go down as one of Ackman's big winners, he is currently known more for his fund's losers - namely his investment in Valeant Pharmaceuticals (NYSE:VRX) International VRX.TO , which he made in 2015 and which has cost his investors billions in paper losses as the stock price crashed 91 percent in the last 52 weeks.

Ackman's exit from Canadian Pacific has some similarities to his exit three years from a losing bet on J.C. Penney JCP.N ; he relied on Citigroup (NYSE:C) to help him exit an 18 percent position by selling 39.1 million shares.

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