Ackman's Pershing Square loses bitter ADP proxy battle

ROSELAND, NEW JERSEY (Reuters) - Activist hedge fund manager William Ackman lost his bid on Tuesday (Nov 7) to win seats on the board of Automatic Data Processing after a hostile, months-long proxy contest that was crucial to him retaining support from some of his own investors.

His Pershing Square hedge fund did not get any of its three nominees, including Mr Ackman himself, elected to ADP's board, with less than 25 per cent of voting shares supporting his proxy campaign.

"This was an ass-whipping," ADP chief executive Carlos Rodriguez said after the vote tally was announced at the payroll processor's annual shareholder meeting in Roseland, New Jersey.

For three months, Mr Ackman and ADP have traded increasingly bitter barbs through securities filings, television appearances, conference calls, webcasts and private meetings with investors.

Mr Ackman, who had expected to win, told Reuters he felt he accomplished a lot despite the loss, which he blamed on a flawed proxy voting system.

"The company, in order to win, made a number of very significant commitments to shareholders about growth," he said at the meeting. "If they achieve those objectives and they exceed them, then I think shareholders will be happy, the stock will go up. If they don't, we'll be back next year."

ADP's stock was down 0.5 per cent at US$110.76 in early trading after the vote results were announced.

Mr Ackman launched the ADP proxy contest as an underdog, taking aim at a company engaged in the unglamorous business of providing human resources technology and largely backed by Wall Street.

ADP's share price has more than doubled under Mr Rodriguez's tenure, and the company has posted relatively solid earnings growth.

But Mr Ackman contends that management complacency has turned ADP into an inefficient corporate slugabed pushing outmoded products that even a top sales force could not sell.

ADP has countered that Mr Ackman brings no new ideas to the table, risks disrupting the company's steady path to growth and behaves like a "spoiled brat".

The 51-year-old billionaire had asked ADP shareholders to approve his proposal to seat three new directors, including himself, and oust three others, including chairman John Jones. He has also suggested Mr Rodriguez is the wrong person for the job, and called for the departure of ADP's technology chief, Mr Stuart Sackman.

Mr Ackman posted double-digit losses in his key funds in 2015 and 2016 due to high-profile bets moving against him, and has produced underwhelming performance this year compared to major stock market indexes. Several Pershing investors who spoke to Reuters in the run-up to the ADP vote said the outcome would affect their confidence in his investment ability.

Mr Ackman said before the proxy battle that he would not exit the ADP investment if the shareholder vote went against him. Instead, he has said he plans to continue agitating for change loudly and publicly from the outside.

Mr Ackman's Pershing Square owns almost 2 per cent of ADP's common shares, making it the seventh-largest voting shareholder, according to Thomson Reuters data.

When counting unexercised options, the value of the stake is roughly US$2.3 billion.