CEO: Economy won't derail CP split TORONTO -- Not even unexpectedly severe weakness in the North American economy could derail Canadian Pacific Ltd.'s much-praised plan to split into five companies, David O'Brien, chief executive of the transport, energy and hotel conglomerate, said Thursday (April 26). Canadian Pacific is a storied company that was once thought of by investors as a proxy for the Canadian economy. It is best known for building the first national railway, which tied the vast country together in the 1880s. It said this week it expected to complete its breakup into publicly traded rail, oil and gas, coal, hotel and shipping companies by late September. "It's possible that the economy could soften further, but that would not prevent the spin-offs from occurring," O'Brien told reporters after presiding over what was likely Canadian Pacific's last annual meeting as a holding company. The company elated investors in February with its break-up plans, which were widely applauded by analysts who had complained the parts of the company, which have been posting rising profits, were worth more than the market was willing to pay for the whole. "We're doing all this from a position of financial strength, and the fact that the economy may be a little slower is not going to be a factor that could prevent us from proceeding with this transaction," said the 59-year-old executive, who plans to retire after the close of the deal. Canadian Pacific is waiting for favorable tax rulings from Canadian and U.S. authorities and expects to mail an information circular to shareholders this summer. A meeting for shareholders to approve the deal is slated for late September. Besides the railway, Canada's second-largest, the company also owns 86 percent of PanCanadian Petroleum, the country's top oil and gas explorer and producer, and 100 percent of CP Hotels, which operates the Fairmont and Delta chains, miner Fording Coal Ltd. and global shipping concern CP Ships. Since the start of the year, Canadian Pacific shares have jumped 47 percent, with excitement over the breakup sparking much of the gain. In the same period, the broad Toronto Stock Exchange 300 composite index is down more than 7 percent. Canadian Pacific closed up C$1.08 at C$61.48 Thursday. The company reported the latest in a string of rich quarterly results on Tuesday. Profit jumped a better than expected 76 percent from the year-earlier period to C$532 million ($343 million), or C$1.69 a share. The increase was due mostly to record results at PanCanadian, driven by strong natural gas prices and rising production. The showing was marred a bit by 19-percent lower operating earnings at Canadian Pacific Railway, which some analysts have said could get swept up in consolidation -- either as an acquisitor or a target -- following its independence. Its operating ratio, a key measure of efficiency defined by operating costs as a percentage of revenues, jumped 5.6 percentage points to 85. 1 percent. The higher ratio, which the company blamed on such factors has high fuel costs and severe weather in the U.S. Midwest, was much higher than that of its chief rival, Canadian National Railway Co. Mike Waites, CP Rail's chief financial officer, said he expected results to improve through 2001, as the carrier cut costs and increased use of its equipment. It has intensified its round of job cuts, tacking on 500 positions to the 1,900 announced two years ago. By the end of this year, the company will have cut 2,000 jobs, or about 10.5 percent of the workforce in two years, Waites told Reuters. He said the railway had no plans to dive into any merger transactions, only expand less-formal alliances with major U.S. carriers, especially those near its the western base. "We can participate, because of where our franchise is located, with those carriers that have great north-south lines. So, for us alliance makes a lot of sense," he said. "More generally, we're really excited about getting out the gate on Oct 1 ... Going back to two or three quarters ago David O'Brien said, 'Look, this is about building businesses'."
They have committed to splitting up the company which has been reflected in the share value to the company. If they step back and say they won't split, the share value will drop and the president will get the heat. The president has committed now and he knows he can't go back, barring an economic crises of substance.
Wonder if this has anything to do with them giving up their Ogden Shops? They will be left without a backshop. Daniel D
