Bill Ackman’s credibility has sunk to a new low.
The billionaire’s investment firm lost $4 billion on a drug company. Its stake in a burrito maker went south. J.C. Penney Co. has been a disappointment, and Ackman was forced to shift strategy on Herbalife, which hasn’t tanked as he said it would.
The latest fail is Automatic Data Processing Inc. Shareholders rejected the three board candidates put forth by Ackman’s Pershing Square Capital Management, including Ackman, the company said. Instead, they handed victories to CEO Carlos Rodriguez, who during the proxy campaign called Ackman “a spoiled brat” and accused him of negotiating like “a used-car salesman.”
ADP said Pershing’s candidates each received support from less than 20% of outstanding shares and less than 25% of the shares voted at the Roseland, N.J., company’s annual general meeting Tuesday. Ten candidates favored by management won.
“That’s really shocking,” said Kai Liekefett, partner and head of shareholder activism at Vinson & Elkins. “That might spell the end of Pershing Square and Bill Ackman as we know it. He has had a really difficult run over the last couple of years.”
Ackman was looking for some good news after the crushing loss on Valeant Pharmaceuticals and the Chipotle Mexican Grill setback. While insisting he remains confident about his bet against Herbalife, Ackman said this month that he’s changed his investment from shorting the stock to put options to head off further losses if the shares keep rising.
“The proxy fight at ADP is an unmitigated disaster for him,” Liekefett said, adding that Ackman’s three-hour presentations focusing on the minutiae of the proxy fight are starting to work against him. “He gets so much into the weeds that he is apparently incapable of dumbing down his message to a couple of points.”
Shares of ADP fell less than 1% in New York trading Tuesday to $110.95 as of 10:31 a.m.
Ackman has said he intends to be a long-term holder of ADP regardless of the final outcome, and that he would be willing to wage another proxy fight next year if the company doesn’t dramatically improve its operations over the next 12 months.
“Here’s to hoping that the company delivers and we don’t need to run for election next year,” Ackman said at the shareholder meeting Tuesday. “Nothing could make me happier than seeing Carlos and the board succeed in meeting and exceeding their commitments. We intend to be a supportive shareholder who is not shy about sharing our ideas with the company. The bottom line is we will do everything we can to help.”
Ackman also took the opportunity to blame the U.S. proxy system, in part, for the loss.
“We were greatly disadvantaged in this contest because ADP did not permit the use of a universal proxy card where each shareholder could choose which directors it wanted to represent them on one proxy card,” he said. “This likely cost us the election.”
ADP came out swinging against Ackman from the start, attacking his less-than-stellar investment record at companies including drugmaker Valeant and J.C. Penney.
Rodriguez, whom Ackman threatened to oust unless he worked with him, said Tuesday in an interview with CNBC he hoped Ackman got the message.
“I hope he moves on,” Rodriguez said. “I think that it was a clearly very resounding victory for the board and our company. I think it’s the largest margin of victory of any large cap proxy contest ever. I think that would hopefully be a message that it’s time to move.”
Earlier, Rodriguez called the defeat of the Ackman slate an “ass-whooping.”
Pershing Square’s defeat follows on the heels of a high-profile proxy battle by Trian Fund Management’s Nelson Peltz at Procter & Gamble in which the consumer-goods giant fended off the investor’s push for a board seat last month.
Pershing Square, which disclosed an 8.3% stake in ADP in stocks and options in August, was seeking three seats on the board, including one for Ackman. Ackman argued the company was losing ground to smaller competitors because of what he called a bloated and insular culture. He also claimed ADP was riddled with inefficiencies and a lack of innovation that he blamed on its “buy not build” strategy.
Ackman’s slate of nominees garnered the support of two prominent shareholder advisory firms, Glass Lewis & Co. and Egan-Jones Proxy Services. A third advisory firm, Institutional Shareholder Services, urged investors to withhold support for one of ADP’s nominees, Eric Fast, in order to make room for Ackman on the board.
ADP resisted Ackman’s push for change, saying the proxy fight was a distraction for the company and was based on inaccurate information. It said the pace and magnitude of the changes Ackman was proposing were risky to the business and could potentially alienate its clients.