Activist William Ackman Loses Bid for ADP Board Seats--3rd Update

By David Benoit Features Dow Jones Newswires

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.

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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.

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The 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 and his Pershing Square Capital Management LP 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 09:58 ET (14:58 GMT)