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WHEN: Today, Wednesday, September 20th
WHERE: CNBC's "Fast Money Halftime Report"
Following are excerpts from the unofficial transcript of a CNBC EXCLUSIVE INTERVIEW with Founder and CEO of Pershing Square Capital Management Bill Ackman on CNBC's "Fast Money Halftime Report" (M-F 12pm ET) today, Wednesday, September 20th. Following are links to the video on CNBC.com: https://www.cnbc.com/video/2017/09/20/bill-ackman-heres-how-adp-can-be-a-more-effective-company.html, https://www.cnbc.com/video/2017/09/20/bill-ackman-adp-has-started-to-see-real-competition.html, https://www.cnbc.com/video/2017/09/20/bill-ackman-i-can-work-effectively-with-adp-ceo-carlos-rodriguez.html, https://www.cnbc.com/video/2017/09/20/ackman-on-pg-proxy-fight-they-treat-nelson-peltz-like-a-virus.html, https://www.cnbc.com/video/2017/09/20/bill-ackman-this-situation-reminds-me-of-pgs-proxy-fight-with-peltz.html & https://www.cnbc.com/video/2017/09/20/bill-ackman-adp-can-acquire-th-lee.html.
All references must be sourced to CNBC.
ACKMAN ON ADP:
THE ISSUE FOR SHAREHOLDERS IS NOT HOW WELL THE COMPANY HAS DONE OVER THE PAST, THE ISSUE IS HOW WELL IT'S GOING DO IN THE FUTURE. THE BOTTOM LINE IS ADP HAS MASSIVELY UNDERPERFORMED RELATIVE TO POTENTIAL. YOU'RE JUDGED RELATIVE TO YOUR POTENTIAL, NOT RELATIVE TO THE STATUS QUO. AND THIS IS A COMPANY WITH HUGE OPPORTUNITIES TO
IMPROVE ITS PROFITABILITY. IT'S NOT AN EFFICIENT BUSINESS.
ACKMAN ON ADP OVERSTATING SHAREHOLDER RETURN:
--THE COMPANY OVERSTATES THEIR TOTAL SHAREHOLDER RETURN UNDER THE CEOs TRACK RECORD. HOW DO THEY DO THAT? THEY START, FOR EXAMPLE, THE MEASURING PERIOD ON THE DAY AFTER HE STARTED THE CEO. WELL, ACTUALLY, IF YOU STARTED ON THE DAY BEFORE, THE NIGHT BEFORE WHICH IS THE PROPER MEASURING PERIOD, THE TOTAL RETURN COMES DOWN BY 17% SO THEY INCLUDE IN THEIR TOTAL RETURN THE PERFORMANCE OF A COMPANY CALLED CDK THAT WAS SPUN OUT OF ADP. SO ADP DISPOSED OF A BUSINESS AND THAT BUSINESS IS BASICALLY DOUBLING ITS MARGINS, THE STOCK PRICE DOUBLED. THEY INCLUDE THAT IN ADP SHAREHOLDER RETURN AND THAT'S ONE OF THE ISSUES THAT WE'D LOVE TO TALK ABOUT.
ACKMAN ON IBM:
IT'S ALL ABOUT THE BUSINESSES POTENTIAL. THIS IS A STOCK THAT HAS DONE WELL. AND BY THE WAY, IF YOU LOOK AT THE STOCK PRICE CHART OF IBM UP UNTIL A PERIOD OF TIME AND YOU TALKED ABOUT THEIR TRACK RECORD. YOU SAY WONDERFUL THINGS I'M NOT SAYING ADP IS IBM TODAY. BUT IT'S AT RISK OF BECOMING IBM IF THEY DON'T TAKE SERIOUSLY THE COMPETITIVE THREATS THAT THEY FACE AND IF THEY DON'T RUN THEIR BUSINESS AS EFFICIENTLY AS THEY CAN.
ACKMAN ON CDK:
ADP, SEPTEMBER 2014, SPUN OFF A COMPANY CALLED CDK. IT WAS OWNED BY ADP FOR 42 YEARS. UNDER ADP'S OWNERSHIP IT HAD 16% EBITDA MARGINS OR OPERATING MARGINS. WITHIN TWO YEARS IT HAD 26% MARGINS WHEN IT WAS SPUN OFF. IF YOU PUT UP A STOCK PRICE CHART OF CDK THIS IS WHAT ADP MISSED OUT ON. IN THREE YEARS THE STOCK HAS DOUBLED.
ACKMAN ON BASIS POINTS:
WE BELIEVE THAT THEY CAN EXPAND MARGINS BY 1,200 BASIS POINTS. SOME ANALYSTS FIND THAT TOO HIGH A NUMBER OR DIFFICULT TO ACHIEVE. THAT'S FINE. BOTTOM LINE IS THE COMPANY'S RESPONSE TO OUR PRESENTATION WAS TO SAY THEY ARE GOING TO GET MARGINS UP 100 TO 200 BASIS POINTS OVER THE NEXT THREE YEARS. OK. THAT'S AN EMBARRASSINGLY LOW NUMBER. THAT'S 16 BASIS POINTS LOWER PER ANNUM THAN THEY PROMISED SHAREHOLDERS. THE COMPANY HAS NOT – GROWTH HAS SLOWED FROM 5%, 6%, 7% AND NOW CALL IT 3.5% IN THE CORE EMPLOYER SERVICES BUSINESS. SO THE BUSINESSES IS NOT HITTING ON ALL CYLINDERS.
ACKMAN SAYS ADP "CAN DO BETTER":
THE BOARD IS BASICALLY SAYING THAT ADP IS THE BEST WE CAN BE AND WE CAN'T DO ANY BETTER. WHAT WE'RE SAYING IS THIS COMPANY CAN DO BETTER. WE'VE HAD A VERY GOOD WORKING EXPERIENCE WORKING WITH THE CEO OF ZOETIS. WE'VE HAD SUPERB WORKING EXPERIENCE WORKING WITH OTHER CEOs OVER THE COURSE OF MY CAREER. AND I THINK I CAN WORK EXTREMELY EFFECTIVELY WITH CARLOS. AND YOU KNOW, A LOT OF THAT BLUSTER THAT YOU SEE IS, YOU KNOW, AGAIN, PR ADVICE.
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