Activist William Ackman Loses Bid for ADP Board Seats--2nd Update

ROSELAND, N.J. -- Activist investor William Ackman lost his bid for three seats on the board of Automatic Data Processing Inc. after a three-month fight over the future of the human-resources software company that turned personal and antagonistic.

ADP investors on Tuesday re-elected the entire 10-person board at the annual meeting at its Roseland, N.J., headquarters, according to people familiar with the matter. The shareholders rejected Mr. Ackman and his two other nominees after the activist had said the company had fallen behind technology-heavy startups and needed to improve its margins.

ADP had argued it was already improving technology and was on a path to improve its margins.

The 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.

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 Chief Executive Carlos Rodriguez to execute.

In the end, Ackman received less than 25% of the shares voted. 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, according to people familiar with the matter.

Separately, ADP raised its quarterly dividend to 63 cents from 57 cents.

For Mr. Ackman, Tuesday's loss could raise new questions about his ability to win support during a period of turmoil for his fund, which has struggled 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, not the investor's recent performance.

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 affirmative vote for him than those who withheld.

Write to David Benoit at david.benoit@wsj.com

(END) Dow Jones Newswires

November 07, 2017 09:02 ET (14:02 GMT)