After failed gamble on Valeant, Ackman mounts comeback bid
ADP pushes back as activist investor attempts to seek board control, oust CEO
Embattled activist investor Bill Ackman is on the comeback trail. It doesn’t look like he’s picked an easy target.
Automatic Data Processing Inc., the outsourcer that handles paycheques for 26 million Americans, is pushing back against Ackman’s Pershing Square Capital Management after saying the investor is seeking “effective” board control and lobbying to oust its chief executive officer.
Pershing Square wants five seats on ADP’s 10-member board at its annual meeting this year and is pushing for CEO Carlos Rodriguez to be replaced, ADP said in a statement Friday. The billionaire activist has also asked ADP to extend its deadline for director nominations, which the company’s board has rejected.
“We believe our current board has an effective balance of leadership continuity and fresh perspectives that will help us to continue this strong track record of delivering value to shareholders,” ADP said.
A representative for Pershing Square declined to comment. The investment firm has not yet disclosed its holding in ADP. Friday’s statement comes after Bloomberg first reported last week that Ackman had built a stake in the firm.
New York-based Pershing Square typically buys large stakes in a handful of big companies and agitates executives and directors to make changes to boost shareholder returns.
Results have been mixed and Ackman, 51, could use some good news. His firm exited a high-profile investment in Valeant Pharmaceuticals International Inc. in March that cost US$4 billion, after spending the better part of two years trying to convince just about anyone the investment was a good one. More recently, Ackman referred to the effort at the controversial drugmaker as a “huge mistake.”
His stake in Chipotle Mexican Grill Inc., meanwhile has been hit as the burrito chain grapples with renewed food-safety concerns, two years after an E. coli outbreak that sent its sales and stock price plummeting. Ackman’s holdings, purchased last year for about US$1.17 billion, are now worth almost US$190 million less than when they were acquired.
There have been successes too: Last year, Pershing Square exited a long-time investment in Canadian Pacific Railway Ltd. that made about US$2.6 billion, and in July it sold part of its stake in fast-food chain holding company Restaurant Brands International Inc. after shares in the owner of Burger King and Tim Hortons rose 39 per cent over the previous year.
Ackman first contacted ADP on Aug. 1 and said his firm owned eight per cent of the company’s shares, largely in derivatives, according to the statement. With ADP’s market value touching US$50 billion, that makes Pershing Square’s stake worth about US$4 billion — by far his biggest single holding, according to data compiled by Bloomberg.
Ackman met with ADP’s leadership this week and said he had a new CEO in mind, people familiar with the matter said.
The talks focused on how to make ADP more nimble and quicker to adopt new technology, helping them compete with smaller competitors, the people said, asking not to be identified because the matter is private. The investor is also planning to push for margin improvements, but didn’t mention plans for a major financial overhaul, they said.
ADP defended Rodriguez in it statement and said investors have been rewarded with a total return of 202 per cent — assuming they reinvested dividends and held on to shares of a unit that was spun off — during his nearly six years at the helm. Pershing Square’s return over the same period is 29 per cent, the statement claimed.
It’s not the first time Pershing Square has pushed for changes at the company. Ackman previously owned shares in ADP from 2009 to 2011, according to data compiled by Bloomberg.
The last time Ackman invested in ADP he agitated for changes including spinning off non-core assets and rationalizing the balance sheet.