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The Morning Brief: Ackman’s Pershing Square Sets Sights on ADP

The activist hedge fund firm confirmed it has a stake in the payroll processing company, which put out a press release rejecting Pershing Square’s request to extend a board nomination deadline.

It’s official. Bill Ackman’s Pershing Square Capital Management owns 8 percent of ADP, the payroll processing company, mostly through derivatives. The investment was reported earlier in the week by several news outlets. But Friday morning ADP got out ahead of the story, acknowledging the investment in a press release, asserting that the activist hedge fund firm is looking to take control of the company by obtaining five of the company’s ten board seats at its upcoming annual meeting, including one for Ackman.

In the press release, the company said Ackman requested that ADP extend the August 10 deadline for nominating directors by 30 to 45 days, which the company refused to do. Ackman also suggested that chief executive officer Carlos Rodriguez may need to be replaced, according to the company’s announcement.

“ADP is open to constructive input from our shareholders, and our Board respects the right of shareholders to nominate directors,” ADP stated in the press release. “However, ADP has a clearly defined Board nomination process, and the 2017 deadline for director nominations has been public for nearly a year.”

ADP stressed that since Rodriguez became CEO nearly six years ago, ADP has returned 202 percent, way outpacing the 128 percent gain of the Standard & Poor’s 500, including dividends reinvested. “ADP has a strong and independent Board, including four new directors who have joined since 2014,” the company added.

Later in the afternoon Pershing Square put out its own press release announcing the investment, saying ADP is its largest position. It also said it intends to file a 13D on Monday, August 7.

“Pershing Square has long admired ADP’s business,” it stated in its press release. “Based on extensive research and due diligence, Pershing Square believes that there is an enormous opportunity to improve the operating performance of ADP by accelerating growth, improving the quality of ADP’s software and service offerings, dramatically reducing operating costs, and increasing efficiency.”

It said that on Thursday Pershing Square officials met with the company’s CEO and chairman at ADP’s request. “At that meeting, we reiterated our request for an extension to the nominating deadline and discussed the potential additions of several independent directors and a Pershing Square representative to the Board,” Pershing Square stated in the release. “We were disappointed to learn from an ADP press release that the company has denied our request for an extension that could have facilitated constructive discussions.”

Last month we reported Pershing Square was raising money for Pershing Square VI and Pershing Square VI International, special purpose vehicles designed to invest in a specific stock. Pershing Square declined to comment then as well as on Friday. Shares of ADP fell slightly on Friday. But they are up more than 7 percent since July 25.

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Elliott Associates has identified a new activist target, yet another technology company. The multistrategy firm said it owns 6 percent of NXP Semiconductors, a Dutch semiconductor maker, stressing the stock is “significantly undervalued” and is “an attractive investment opportunity.” It owns 4.9 percent of the shares through common stock and the other 1.1 percent in the form of cash settled swaps. Elliott asserts in a regulatory filing that “there are numerous opportunities to maximize shareholder value” and that it has engaged in or plans to discuss these plans with a wide variety of interested parties, including management, the board of directors, and other potential interested parties. Elliott also acknowledges that NXP has a pending $38 billion merger deal with Qualcomm. In late June European regulators reviewing the deal asked for more information and postponed its earlier October 17 deadline for completing this review. Shares of NXP rose 1.6 percent on Friday, to close at $112.42.

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Keither Meister’s Corvex Management bought nearly one million shares of Energen Corporation, boosting its stake in the oil and gas exploration and production company to 9.8 percent. It paid between roughly $49 and $54 for each of its latest shares. We earlier reported that in June Meister called on the company to put itself up for sale. In late June, Meister said in a filing he was “very disappointed” that the company announced on June 19 it will “continue with a status quo business plan.” Meister noted the stock’s subsequent decline and said he was “troubled by the failure of the process by which the Board came to its decision.”

He added, “I encourage the Board to embrace this opportunity to course correct and obtain the views of its shareholders in connection with deciding on the future direction of the company. If you fail to take such actions on your own, be assured that…will be resolute in pushing for a meaningful path for all stakeholders to have a direct voice in the plans for the company’s future.” Shares of Energen climbed 3.5 percent, to close at $49.95.

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Arnaud Langlois, who was previously a trader with Millennium Capital Partners, is gearing up to launch his own long-short hedge fund, Terreneuve Capital, according to Reuters. Langlois was an equities portfolio manager at Millennium Capital from November 2013 to June 2017, according to the report, citing filings with Britain's Financial Conduct Authority. Before that, he worked at UBS O’Connor and Brevan Howard Asset Management.



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