UPDATE 2-Payroll firm ADP seeks to fend off activist investor Ackman

Aug 4 (Reuters) - Automatic Data Processing Inc said on Friday it had rejected a call from William Ackman's activist hedge fund Pershing Square Capital Management LP for more time in his bid to gain control of the U.S. human resources outsourcing company.

Ackman's pursuit of ADP, which has a market value of about $50 billion, comes as the 51-year-old hedge fund veteran is seeking to score a big win following disappointing investments in debt-laden drugmaker Valeant Pharmaceuticals International Inc and norovirus-stricken restaurant chain Chipotle Mexican Grill Inc.

ADP said that Ackman is seeking to nominate five board directors, including himself, to ADP's ten-member board, and also to oust Carlos Rodriguez, the company's chief executive since 2011.

Ackman requested that ADP extend its Aug. 10 deadline for nominating directors by 30 to 45 days, which the company declined to do, according to its statement on Friday.

Ackman has also told ADP that he will meet the Aug. 10 deadline if the company refuses to extend it, according to people familiar with the matter who requested anonymity to discuss private talks.

Pershing Square declined to comment.

If Ackman misses the nomination deadline, ADP's bylaws dictate that he would have to muster the support of 33 percent of the company's shareholders to call for a special shareholder meeting, if he does not want to wait for next year's annual meeting.

ADP is the third-most shorted company in the data processing and outsourced services sector behind Visa Inc and PayPal Holdings Inc, according to data analytics firm S3 Partners, amid concerns that new business bookings are slowing down.

ADP said that during Rodriguez' six-year tenure, ADP has yielded a total shareholder return (TSR) of 202 percent, well in excess of the S&P 500 TSR of 128 percent and many times over Pershing's TSR of 29 percent.

In a meeting with ADP executives this week, Ackman said the company is poorly managed but provided little detail as to his plans, according to the sources.

While Ackman may be able to score points with criticism of the company's strategy, he may find it hard to challenge Rodriguez given his track record as CEO, some analysts said.

"Rodriguez has very broad-based investor support and has factually delivered very compelling returns for shareholders so Pershing Square faces an uphill battle in this case," said Bernstein Research analyst Lisa Ellis.

ADP said Ackman has told the company he owns an 8 percent stake, largely accumulated through derivatives that relieve him from a regulatory requirement to publicly report his stake once its crosses a 5 percent threshold.

Accumulating a position by stealth allows activist investors to build large stakes more cheaply, because the stock does not run up once other company shareholders find out about their bet. However, reports of Ackman building a stake in the company surfaced last week, and ADP's stock has risen 8 percent since then.

Prior to building Pershing's position in ADP, Ackman approached a number of his hedge fund investors to raise money earmarked only for the ADP bet through a special purpose vehicle, sources familiar with the fundraising said. Pershing Square currently has around $10 billion in assets under management.

Several companies have lost their CEOs recently under pressure from activist shareholders. Just this week, hedge fund Barington Capital notched a victory as Avon Products Inc CEO Sheri McCoy announced she would step down. Carl Icahn won an even bigger prize by calling for the ouster of American International Group Inc CEO Peter Hancock, who left the company earlier this year. (Reporting by Svea Herbst-Bayliss in Boston and Greg Roumeliotis in New York; Additional reporting by Supantha Mukherjee and Laharee Chatterjee in Bengaluru; Editing by Shounak Dasgupta and Bill Rigby)