ADP Says Ackman Overstated Ownership Stake in Proxy Fight

Updated on
  • Pershing Square entitled to vote only 2 percent of ADP shares
  • Ackman’s claim to larger stake based on unexercised options

Automatic Data Processing Inc. accused Bill Ackman of “misrepresenting” his ownership stake as it fights the activist investor’s bid for three seats on its board.

In a presentation filed Tuesday with regulators, the human resources and payroll outsourcing firm cast doubt on the ability of Ackman and his two other nominees to implement changes at the company given his hedge funds’ lack of technology experience.

Ackman’s Pershing Square Capital Management disclosed an 8.3 percent stake in ADP in August and is seeking three seats on the company’s board. Pershing Square currently holds about 2 percent of the company’s common shares, with the rest of the stake held in call options that haven’t been exercised, according to its latest regulatory filing on Sept 5.

“In referring to Pershing Square as the company’s largest owner with an 8.3 percent stake, Bill Ackman is misrepresenting the degree of his investment in ADP,” according to ADP’s presentation.

As a result of not exercising those options, which have expiration dates ranging from 2020 to 2021, Pershing Square will only be able to vote its 2 percent stake -- about 8.8 million shares -- at the company’s annual general meeting on Nov. 7, ADP said.

Exercising the remaining options would cost Pershing Square about $2 billion, Roseland, New Jersey-based ADP said.

A representative for Pershing Square declined to comment.

Troubled Campaigns

ADP also called into question the experience of Ackman’s nominees, including the billionaire himself. It highlighted Ackman’s disastrous experience as a director at Valeant Pharmaceuticals International Inc., which cost his hedge fund $4 billion, as well as his troubled campaigns at J.C. Penney Co. and Target Corp.

Pershing Square also lacks industry expertise, with 83 percent of its 40 activist campaigns having focused on the consumer, real estate and financial sectors.

“Pershing Square has no experience in the technology sector,” according to the presentation.

ADP said that it’s on the right path and has had total returns of about 203 percent since its Chief Executive Officer Carlos Rodriguez took over in 2011.

Last week, Ackman extended an olive branch to ADP, saying he would prefer to avoid a proxy fight. He proposed expanding the board by three members to make room for his nominees. His original plan was to replace ADP incumbents, including Chairman John Jones and the two longest-serving directors, Eric Fast and R. Glenn Hubbard.

ADP rejected Ackman’s proposals and put forth its own slate of 10 nominees for the board. After a two-hour meeting with Ackman last week, ADP said its board held an executive session and concluded the company is on the right path. It called the pace at which Pershing Square believes ADP can improve its operating margins “vague and risky.”

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