D.E. Shaw Builds Activist Stake In Lowe’s

By Cara Lombardo and David Benoit

Two activist hedge funds have built small stakes in Automatic Data Processing Inc., according to people familiar with the matter, adding pressure to the payroll-processing firm as it tries to jumpstart growth.

The two investors, D.E. Shaw Group and Sachem Head Capital Management, haven't decided whether they would try to push for changes at the company, the people said, but they have met separately with ADP's management and are closely tracking its performance. ADP earlier this month increased its revenue guidance for its fiscal year, which ends June 30, and its shares are up about 8% so far this year. The size of two firms' stakes is unclear.

D.E. Shaw and Sachem Head, which aren't working together, built their ADP stakes ahead of a key meeting for the company next month. The Roseland, N.J., company plans to hold an analyst day in mid-June, where it is expected to detail its plans for new growth.

The two investment firms join William Ackman, another activist investor, as investors in ADP. Last year, Mr. Ackman's Pershing Square Capital Management LP, which owns about 7.2% of ADP, including derivatives, lost a proxy fight by a wide margin for three ADP board seats. Mr. Ackman had argued the company fell behind technology-focused startups and needed to improve its margins, which ADP insisted it was already doing.

ADP is Pershing Square's largest investment. Mr. Ackman and Pershing Square analyst Charles Korn said on Pershing Square's earnings call Tuesday that ADP accelerated its bookings and did a better job retaining business in its latest quarter and stands to benefit from the tax-law overhaul, an accounting rule change and rising interest rates. Pershing Square bought the ADP stock about 10 months ago at an average cost of about $104, Mr. Ackman said, and it has risen 22% to $126.68.

Other activist hedge funds also have looked at ADP recently, as some believe Pershing Square had the right ideas but misstepped in the proxy fight, the people said, but those funds so far haven't gotten involved.

Sachem Head was founded by Scott Ferguson, who previously worked at Pershing Square. D.E. Shaw, which has historically focused on computer-driven quantitative trading, has only recently started to dabble in activism. Earlier this year, it shook up the board at Lowe's Cos.

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