By David Benoit
ROSELAND, N.J. -- William Ackman lost his bid for three seats on
the board of Automatic Data Processing Inc., a resounding rebuke of
the struggling activist investor as shareholders sided with
management at the human-resources software company.
ADP investors on Tuesday re-elected the entire 10-person board
at its annual meeting, capping a battle between management and Mr.
Ackman that was particularly acrimonious and colorful -- even by
typical proxy-fight standards.
Mr. Ackman, who according to ADP won less than 25% of the shares
that were voted, said he got "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.
The fight between Mr. Ackman and ADP was nasty from the very
start. ADP in August announced Mr. Ackman's Pershing Square Capital
Management LP had built a stake, a release that pre-empted the
activist investor's own disclosures. And it rejected his initial
demands on a morning Mr. Ackman said he was headed for vacation.
Mr. Rodriguez, in a TV interview later in August, called him a
"spoiled brat."
The barbs continued from there, all the way through Tuesday. In
an interview after the vote, Mr. Rodriguez stayed on the offensive.
He admitted he had lost his cool with his closing comment, but he
said Mr. Ackman's campaign had been insulting to his employees and
he rejected the idea that management was under any more pressure
than normal.
"Frankly, what Pershing Square and Bill Ackman have to say are a
very small part of the pressure on my day-to-day life," Mr.
Rodriguez said. "Yes, this battle's over. We won."
Mr. Ackman said it wasn't over and that the CEO's comment wasn't
respectful of shareholders of ADP, a $50 billion company that helps
businesses handle repetitive HR functions like payroll and
timekeeping.
"We are going to hold them accountable," Mr. Ackman said,
raising the likelihood of further tension, particularly if ADP
slips at all with the promises it made. "We are rooting for
ADP."
He said he would be judged as an investor on the stock
performance, not on whether he won this proxy fight. Pershing
Square holds about 2% of the common stock and derivatives that
would bring the stake to about 8%.
Still, for Mr. Ackman, the magnitude of Tuesday's loss raises
new questions about his ability to win support during a period of
turmoil for his fund, which has struggled in recent years and
suffered a $4 billion loss after a bad bet on Valeant
Pharmaceuticals International Inc.
Mr. Ackman's Pershing Square 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. He
also recently restructured his five-year bet against Herbalife
Ltd., limiting potential losses as his position had continued to
lose money.
Mr. Ackman points instead to his long-term record, saying
Pershing Square has returned more than 500% since its January 2004
start, compared with the S&P 500's roughly 200%.
In Tuesday's vote, large ADP shareholders Vanguard Group and
State Street Global Advisors threw their weight behind the company,
according to people familiar with the matter. But BlackRock Inc.,
ADP's second-biggest investor, voted its shares in favor of Mr.
Ackman, a key vote of confidence for him, the people said.
Mr. Ackman's defeat Tuesday was worse than in a typical proxy
fight where the activist lost, according to Proxy Insight. The
margin between Mr. Ackman and the closest ADP director was greater
than 30 percentage points, compared with an average management win
of 23 percentage points in six similar votes this year.
ADP is the third major company this year to beat back an
activist, along with General Motors Co. and Procter & Gamble
Co., although P&G's result last month was so close that it is
in dispute. While activists have continued to shake up corporate
giants through brokered settlements, the companies have won
high-profile fights at the polls, reaffirming to some that a firm
whose stock hasn't plunged and which has a set plan to improve can
win some time with shareholders.
In the ADP fight, 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 increase margins.
From the start, ADP sought to put Mr. Ackman on the defensive,
with advisers and Mr. Rodriguez confident its past performance and
narrative would deflect a shareholder he called "the loudest voice
in the room."
ADP's stock has performed well compared with the S&P 500
during Mr. Rodriguez's tenure and rose 1.3% to $112.75 Tuesday.
The two sides even argued about the final tally of votes, a
dispute that echoed several earlier dust-ups the companies had over
numbers. Mr. Ackman said the tally was closer than it appeared,
citing that he won about 81 million votes while ADP director Eric
Fast, who received the lowest tally among sitting board members,
had gotten about 183 million. If the contest was just between those
two, Mr. Ackman said, he would only have lost 69% to 31%. A total
of about 326 million shares were cast in the election.
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.
Write to David Benoit at david.benoit@wsj.com
(END) Dow Jones Newswires
November 07, 2017 19:36 ET (00:36 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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