Canadian Pacific_Train
In 2017, CP said it plans to continue to find opportunities to enhance the productivity, fluidity and safety of its operations.
Photo courtesy of Canadian Pacific. 
 
CALGARY, ALBERTA, CANADA — Keith Creel has been named president and chief executive officer of Canadian Pacific Railway Ltd. (CP), effective Jan. 31. He will succeed E. Hunter Harrison, who is stepping away from the company immediately, months ahead of his scheduled departure date. Creel will assume the CEO’s responsibilities over the next few weeks until taking on the role permanently, CP said.

CP_Keith Creel_President and CEO
Keith Creel

“Hunter has made enormous contributions to CP, and we are forever grateful for his years of service,” said Andrew F. Reardon, chairman of the board. “We have a tremendous CEO-in-waiting in Keith Creel. Keith and his team are ready to formally take the reins.”

CP said Harrison had approached the board to discuss his retirement from CP and potential related modifications to his employment arrangements that would allow him to pursue opportunities involving other Class 1 Railroads. A special committee of the board oversaw discussions with Harrison, and following negotiations, receipt of independent legal advice, and careful deliberation, the special committee recommended to the board that CP enter into a separation agreement with Harrison.

CSX_Train_Photo Courtesy of Shutter Shock
The Wall Street Journal has reported that Harrison will partner with Paul Hilal, an activist investor, to try and land a top management position at another rail company, CSX.
Photo courtesy of Shutterstock.
 
Under the terms of the separation agreement, CP has agreed to a limited waiver of Harrison’s non-competition obligations. Harrison has agreed to terminate all roles he has with CP and forfeit substantially all benefits and perquisites he is entitled to receive from CP going forward, including his pension. In addition, he has agreed to surrender for cancellation all of his vested and unvested equity awards, except for a portion of his vested options he was granted upon arrival at CP in June 2012. The total value of benefits and awards forfeited by Harrison is approximately C$118 million, CP said, with the value of the equity awards surrendered calculated based on their in-the-money value relative to the current trading price of CP's shares.

The Wall Street Journal has reported that Harrison will partner with Paul Hilal, an activist investor, to try and land a top management position at another rail company, CSX.

In a Jan. 18 conference call with analysts to discuss fiscal 2016 results, Creel said he was “humbled and honored to lead” CP as it goes forward.

“It’s with mixed emotion that as Hunter leaves, I’ve worked with Hunter the last 20-plus years,” Creel said. “He’s been a close friend, a mentor. He has taught me the railroad business. But I can tell you this, if he’s taught me anything, he’s taught me how this operating model works and how to produce sustainable results, and this team is prepared for this transition.

“Some people say it’s an early transition. When I left the other railroad to come here to work with Hunter back in 2013, we had actually planned this transition this past summer. So we’re certainly prepared. This team is in place. The foundation is set and we will succeed.”

Net income at CP in the year ended Dec. 31, 2016, totaled C$1.599 billion, equal to C$10.69 per share on the common stock, up from C$1.352 billion, or C$8.47, in fiscal 2015. Total revenues fell to C$6.232 billion from C$6.712 billion.

Canadian grain freight revenues totaled C$962 million in 2016, down 10% from C$1.068 billion in 2015, while U.S. grain freight revenues eased 1% to C$518 million from $522 million. Carloads of Canadian grain also declined in 2016, falling to 270,000 from 285,000 in 2015, but in the United States, grain carloads increased 5% to 162,000 from 157,000.

“2016 featured stiff economic headwinds and a challenging volume environment, headlined by a precipitous decline in crude oil shipments and weakness in grain movements, particularly in the first half,” Harrison said. “These are not excuses, but opportunities to showcase our operating ability and leadership. As we have shown over the last four years, the precision railroading model works in all economic conditions.”

In 2017, CP said it plans to continue to find opportunities to enhance the productivity, fluidity and safety of its operations.