U.S. Markets open in 5 hrs 49 mins

Ackman Exits Positions in United Techologies and ADP

Scott Deveau

(Bloomberg) -- Bill Ackman’s Pershing Square Capital Management has liquidated its positions in United Technologies Corp. and Automatic Data Processing Inc. as the firm builds up its cash reserves for new investments.

Ackman has decided to sell his stake in industrial company United Technologies rather than fight its takeover of defense contractor Raytheon Co., according to people familiar with the matter, who asked to not be identified because the matter isn’t public. He had vowed to oppose that deal in June, saying it lacked strategic sense.

Ackman has exited payroll processor ADP -- the last company where he waged a proxy fight -- because much of the low-hanging fruit has been plucked, he said in a letter Monday to co-investors in a special purpose vehicle set up to invest in the company. A copy of the letter was obtained by Bloomberg News.

ADP’s shares rose as much as 2% Tuesday and were trading at $162.66 at 11:32 a.m. in New York. United Technologies’ shares were up 0.6% to $126.46.

The billionaire investor will use the proceeds from the sales in the companies for other opportunities. He already has a new position.

The hedge fund’s publicly traded affiliate Pershing Square Holdings Ltd. has made a new, undisclosed investment that amounted to 12% of its net asset value, the firm said in a statement Monday, confirming a Bloomberg News report.

As of July 31, Pershing Square Holdings’ total assets under management amounted to $5.6 billion, according to its website, meaning its stake in the new investment would amount to at least $672 million. It did not detail how much of the new investment was held by its private funds, which could increase the value of the stake.

Separately, the firm raised $400 million issuing debt last month.

Representatives for United Technologies and ADP didn’t respond to requests for comment.

Ackman disclosed an 8.3% stake in ADP in 2017 and sought to replace three board directors in a proxy contest at the company. ADP shareholders rejected his proposal.

It was still a successful investment, returning about 50% for Pershing Square’s co-investors, according to Ackman’s letter. Pershing Square acquired its ADP stake for its co-investors i at an average cost of $114.76 a share and exited on July 31 when its share closed at roughly $167 a piece, according to the letter.

Ackman took credit in the letter for at least part of those gains by shining a spotlight on the company’s growth potential and spurring on management to improve its operations.

“Our activism bore significant fruit,” he said. “As a direct result of our activism, ADP made commitments to accelerate revenue growth, bolster its competitive position in the enterprise market, and improve efficiency and margins.”

ADP was Ackman’s last high-profile proxy fight. After several setbacks in the previous years, including his losing bets on Valeant Pharmaceuticals International Ltd. and Herbalife Ltd., Ackman was forced to rethink his approach following a flurry of investor redemptions.

Since then, Ackman has stepped back from the limelight and put a renewed focus on his investment strategy. Pershing Square’s investments have returned roughly 50% this year through July 31, according to its website.

At the same time, his once-troubled investment in Chipotle Mexican Grill Inc. has turned around, with its shares hitting a record high last month under the stewardship of its new chief executive officer, Brian Niccol.

(Updates shares in fourth paragraph; adds Pershing Square statement in sixth paragraph.)

--With assistance from Richard Clough.

To contact the reporter on this story: Scott Deveau in New York at sdeveau2@bloomberg.net

To contact the editors responsible for this story: Liana Baker at lbaker75@bloomberg.net, Matthew Monks

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.