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

By Cara Lombardo and David Benoit

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (May 16, 2018).

Two activist hedge funds have built small stakes in Automatic Data Processing Inc., adding pressure to the payroll-processing firm as it tries to jump-start 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, according to people familiar with the matter, but they have met separately with ADP's management and are closely tracking its performance. ADP earlier this month increased its revenue forecast for its fiscal year, which ends June 30, and its shares are up about 8% so far this year.

The Wall Street Journal had reported Tuesday afternoon that the firms had built stakes. Both disclosed in filings after markets closed Tuesday that they owned about 0.4% stakes as of the end of March, worth around $250 million. The quarterly filings are required for large money managers, but don't include derivatives.

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. Shares have risen 22%, closing Tuesday at $127.08.

Shares of ADP closed up 0.3% to $127.07 after The Wall Street Journal first reported the new investors Tuesday.

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.

Write to Cara Lombardo at [email protected] and David Benoit at [email protected]

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


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