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January 24, 2017 12:10 PM, EST

Canadian Pacific Separation Deal With Harrison Stokes CSX Speculation

Norm Betts/Bloomberg News

Canadian Pacific has reached a separation agreement with CEO Hunter Harrison effective at the end of the month, according to a filing with the Securities and Exchange Commission, which could stoke speculation that he and private investor Paul Hilal will attempt to assume control at rival railroad CSX.

The agreement forbids Harrison from working at Canadian National Railway Company, BNSF Railway Co. or Union Pacific Railroad, but would allow him to take a job at CSX Corp. or Norfolk Southern Corp.

“This increases our conviction that Mantle Ridge [Hilal’s company] is likely to play an activist role at CSX, proposing Mr. Harrison for the CEO seat,” Walter Spracklin, rail industry analyst at RBC Capital Markets, wrote.

If successful, it would likely mean current CEO Michael Ward, 66, would retire after 13 years at the helm and nearly 40 years at the company. Ward told Trains Magazine in February 2016 that he planned to retire in 2019.

“We suspect activist Mantle Ridge is trying to reach an agreement to install Hunter as CEO. If CSX resists, Mantle Ridge has until Feb. 10 to nominate a slate of directors and wage a proxy campaign,” wrote Wolfe Research analyst Scott Group in an investors note.

The separation agreement, which covers 36 months, carved out a notable exemption on hiring current Canadian Pacific executives to join another railroad, forbidding him from soliciting anyone above manager except chief of staff Mark Wallace.

Harrison also will not be eligible for any bonuses based on Canadian Pacific’s performance in January.