By David Benoit
ROSELAND, N.J. -- William Ackman lost his bid for three seats on
the board of Automatic Data Processing Inc., the latest blow to the
struggling activist investor as shareholders sided instead with
management at the human-resources software company.
ADP investors on Tuesday re-elected the entire 10-person board
at the annual meeting at its Roseland, N.J., headquarters. Mr.
Ackman and his two nominees received support from holders of less
than 20% of ADP's shares and less than 25% of the shares that were
voted at the meeting, ADP said.
"We came in peace," Mr. Ackman said after his defeat at the
meeting. "The point I would like to make is we believe it's a very
significant amount of shareholder support."
But ADP Chief Executive Carlos Rodriguez disagreed, closing the
meeting with a parting shot from the stage:
"Bill...despite your characterization of the result as close,
what I was told was this was an 'ass-whooping,'" he said.
For Mr. Ackman, Tuesday's loss raises new questions about his
ability to win support during a period of turmoil for his fund,
which has struggled of late and suffered a $4 billion loss after a
bad bet on Valeant Pharmaceuticals International Inc. Still,
activist fights are typically decided based on the issue on the
table, rather than the investor's recent performance.
Mr. Ackman's Pershing Square Capital Management LP has
underperformed for nearly three years, largely because of the
bruising loss on Valeant. Its main fund has lost 24% since 2014,
compared with a one-third climb in the S&P 500. The fund is
roughly flat this year through October, while the S&P 500 rose
17%, including dividends.
Mr. Ackman points instead to his long-term track record, saying
Pershing Square has returned more than 500% since its January 2004
start, compared with the S&P 500's roughly 200%.
The ADP fight had been a heated one between Mr. Ackman, one of
Wall Street's most powerful and polarizing investors, and Mr.
Rodriguez. Mr. Ackman had said the company fell behind
technology-heavy startups and needed to improve its margins. Mr.
Rodriguez countered that ADP was already improving technology and
was on a path to improve its margins.
"I want to thank the shareholders for this vote of confidence,"
Mr. Rodriguez said at the meeting.
Even Mr. Ackman's efforts to address the meeting didn't go
smoothly. He sat in the middle of the pack in the meeting in the
basement at ADP's headquarters and was offered a chance to comment
toward the start of the meeting. He stood up and said he had hoped
to speak at the end instead. He was told no. He said he was
"delighted to be here" and sat down.
At the end of the meeting, the sides quickly debated before he
was given a chance to speak, with Mr. Rodriguez winning a laugh by
forcing Mr. Ackman to form his remark as a question in order to
follow meeting procedures.
Big investors Vanguard Group and State Street Global Advisors
voted in favor of ADP, while BlackRock Inc. voted its shares in
favor of Mr. Ackman, a key vote of confidence for him, according to
people familiar with the matter. Several investors, including one
in the top 10, had told The Wall Street Journal that they believed
ADP needed to improve but also trusted management and Mr. Rodriguez
to execute.
ADP's stock had performed well compared with the S&P 500,
and some had questioned why Mr. Ackman had sought to target it in
the first place. On Tuesday, even amid the storm, ADP raised its
quarterly dividend to 63 cents from 57 cents.
ADP shares slid 1.2% to $109.95 in morning trading.
Mr. Ackman has argued in recent days that he already had pushed
ADP to promise to improve operations and margins. Mr. Ackman has
said he intends to stay in the stock and believes the proxy fight,
win or lose, would create a path for ADP to improve in the coming
year or risk putting him on the board in 2018. He said he would be
judged as an investor on the stock performance, not whether he was
elected or not.
Mr. Rodriguez had attacked Mr. Ackman from the outset of the
fight, at one point even calling him a "spoiled brat" on
television, and he sought to discredit Mr. Ackman because of his
performance. ADP said it would complain to the Securities and
Exchange Commission over some of Mr. Ackman's accusations.
In turn, the activist had accused Mr. Rodriguez of misstating
private conversations about his requests and misleading investors
about what was happening.
Institutional Shareholder Services Inc., the biggest proxy
adviser, had suggested Mr. Ackman made valid points and supported
his election to the board. But instead of suggesting investors vote
directly for Mr. Ackman, ISS instead called for them to withhold
their votes from a sitting ADP director, opening a spot for Mr.
Ackman. ISS said electing Mr. Ackman's three nominees would
introduce too much risk, so it chose that unusual tactic.
Because most investors can only vote on one ballot or the other,
that opinion was a blow to Mr. Ackman because following ISS's
recommendation would lead investors to cast their ballots on
management's card. Mr. Ackman's election would only happen if more
investors turned in an affirmative vote for him than those who
withheld.
Write to David Benoit at david.benoit@wsj.com
(END) Dow Jones Newswires
November 07, 2017 10:10 ET (15:10 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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