Romancing Keith

It was known by practically everyone, when hedge fund manager Bill Ackman fought to install retired Canadian National CEO Hunter Harrison in the top job at rival Canadian Pacific, that Keith Creel would eventually follow his former boss to be Harrison’s right-hand man in Calgary. And in February he did just that, becoming CP’s president and chief operating officer as well as heir apparent to the top job. Now writer Scott Deveau of Canada’s Financial Post has revealed in a fascinating story how Creel was brought aboard. As the paper said, there was never a bidding war, because it wasn’t about money. You can read the story here.

It always made sense to me that Creel would jump from CN, where he was executive VP and chief operations officer, to reunite with his old boss. The guy is smart and talented. He trained under Harrison at Illinois Central and rose to the top operating job at Canadian National after it bought IC and while Harrison was at the helm of that company.

The problem with Creel’s staying at CN was that he had nowhere to go. At age 45, he is only six years younger than Claude Mongeau, who succeeded Harrison as CEO of Canadian National on January 1, 2010. Creel would have had to wait until perhaps 2028 for a chance to run CN. But Harrison, 68, has said he will only stay at Canadian Pacific about three years before reentering retirement. And now Creel is positioned to be his successor. As president of CP, he has the marketing and operating vice presidents reporting to him.

So what’s the scoop on prying Creel away from Canadian National? Here’s the story that Deveau tells: Paul Hilal, a senior partner of the New York hedge fund, Pershing Square Capital Management, conceived of the CP investment and was the behind-the-scenes leader of its campaign to oust Fred Green from the railroad’s top job. Creel’s name was raised in the initial discussions Harrison had with Pershing Square. According to Deveau, Harrison considered Creel “the one active railroad executive ideally suited to lead the turnaround at CP.”

Hilal said Creel’s cell phone number was burned into his memory but he dared not call it because Harrison was bound by agreement not to approach any former CN colleagues until after December 31, 2012. As Hilal said: “All my research into the guy was through indirect references. So, rather than call him and speak to him, I actually listened to CN’s earnings calls and investor events where he was speaking to get a sense of him as a person, how well he responded to questions, how he thought on his feet, and how well he would fit.”

So on January 4, Hilal made that call. Creel, naturally, was interested in jumping to CP, but he felt compelled to tell his boss at CN, Mongeau, of the recruiting effort. Mongeau could not possibly have been surprised. At this point everyone was in a rather delicate position. CN had sued Harrison for violating his non-compete agreement upon retirement. Creel was bound by a non-compete agreement with CN, too. And Mongeau was in danger of losing his own top transportation officer.

The whole matter was resolved in a series of one-on-one telephone calls between Harrison and Mongeau. CN agreed to drop the lawsuit against Harrison and to void Creel’s non-compete agreement with CN, allowing him to go to Canadian Pacific. And CP agreed not to hire any CN manager before 2016.

Said Harrison to the Financial Post: “It’s wonderful. It gives me a little break, and we’re kind of splitting up the country. He’s a welcome addition and we’re proud to have him.” And Creel: “I knew from the other side this [CP] was a sleeping giant. This franchise is a very powerful franchise that was, to me, not being tapped into. The giant is awake now and it’s starting to move.”

Get used to the name: Keith Creel. You’ll be hearing a lot from him the next two decades. — Fred W. Frailey