BILL ACKMAN: ADP’s stock could double in five years

William ‘Bill’ Ackman, CEO and Portfolio Manager of Pershing Square Capital Management, speaks during the Sohn Investment Conference in New York City.
Thomson Reuters

Activist investor William Ackman laid out his case for changes at Automatic Data Processing Inc on Thursday, saying the payroll processor needs to improve its profit margins and integrate its business lines.

Ackman’s hedge fund Pershing Square Capital Management disclosed earlier this month an 8 percent holding in the $50 billion U.S. human resources outsourcing company and nominated three directors to serve on its board.

ADP has strongly resisted the approach, refusing Ackman’s request to extend the company’s director nomination deadline and publicly criticizing the investor and his strategy.

Ackman said in a conference call the company has underperformed its competitors and failed to properly integrate the products it has amassed through acquisitions.

“ADP’s margins are vastly below what they should be,” Ackman said on the call, saying the stock price could double in five years without the company needing to change its dividend, capital structure or credit rating.

Earlier this month, Pershing Square’s disclosure of it stake in the company sparked a testy-back-and-forth between the activist fund and the company which handles Americans’ paychecks.

In an interview with CNBC last week, ADP CEO Carlos Rodriguez compared Ackman’s request to extend the deadline for nominating board members to “a spoiled brat in school asking the teacher for an extension for their homework.” Pershing Square has said that Rodriguez “unfairly characterized” their interactions to make the fund’s efforts “appear unreasonable.”

Pershing Square is seeking three board seats, including one for Ackman. ADP has said that its nominating/corporate governance committee will evaluate Ackman’s nominees “as they would any other potential directors.”