ADP Rejects Pershing Square Board Nominees

Aug 21 2017 | 6:29pm ET

Payroll processing behemoth Automatic Data Processing has officially rejected the slate of board nominations put forth by Bill Ackman’s activist hedge fund Pershing Square Capital Management, all but guaranteeing a bruising proxy battle between now and the company’s annual meeting in early November.

In a statement, ADP said its board, acting on the recommendations of its nominating and corporate governance committee, unanimously voted not to endorse any of Pershing’s three candidates. Ackman’s nominees do not bring “bring additive skills or experience to ADP's board,” the company said in the statement.

Accordingly, ADP will nominate its existing ten directors for re-election. “Unlike Mr. Ackman's nominees, ADP's directors have a deep understanding and appreciation of the current state of ADP's business and its clients, and what it takes to successfully execute on our 'All in on HCM' strategy,” the statement added.

Ackman Pershing Square’s launched its activist campaign against ADP in early August. The hedge fund owns some 8.3% of ADP’s stock and hosted a 3 1/2 conference call last week to explain its investment case. In the call, Ackman said he thought ADP’s stock could double in five years if the company adopted a range of measures including cost cuts, better business unit integration, investments in technology and monetization of real estate. 

Analysts have been largely skeptical about the impact of Ackman’s suggestions since the call, noting that ADP’s performance has been strong (in the last six years, the company’s total shareholder return of 202% is well in excess of the S&P 500’s gain of 128%) and that the issues Ackman identified, such as lower margins than its smaller competitors, are already well-known to management.

For his part, Ackman responded to ADP by noting the company did not address the issues he has raised and pointing out that the current board owns a mere 0.09% of ADP’s stock, compared to Pershing Square’s 8.3%. “The fact that the board believes that the company's largest owner…does not deserve even one board seat speaks to their insularity and lack of shareholder perspective," Ackman said a statement Monday afternoon. 

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