Jewelry   Body jewelry   Charms  

Ceridian split may be unavoidable

Ceridian split may be unavoidable
Steveo  |  by www.startribune.com. All rights reserved. 2.04 | 6:28

A hedge-fund manager who wants a spinoff has proposed his own slate of directors.
By Neal St. Anthony, Star Tribune
Last update: February 25, 2007 ndash; 4:26 PM
Change is coming at Bloomington-based Ceridian Corp.

The only questions are how much and how fast. The company, which provides human resources systems, assistance and automated payroll services to corporate clients, has hired strategic advisers to help its board examine options for boosting performance. There's big pressure on the board and CEO Kathy Marinello if they expect to continue with a consolidated Ceridian.

Marinello, a veteran financial services executive, was recruited to Ceridian in October from GE Fleet Services. The next thing she knew, the hedge funds came calling. It will ask shareholders to support its slate at Ceridian's as-yet-unscheduled annual meeting this spring.

Ceridian's stock price has risen from $26 to $34 per share since Pershing announced in December that it had acquired more than 11 percent of the outstanding shares. Trading volume has been extremely heavy since then, suggesting that other funds and short-term speculators have moved at the scent of a breakup and short-term payoff, analysts and investors say. And the other big institutional owners, such as Fidelity Investments and Harris Associates, typically don't show their hand.

In short, Ackman Co., joined by the other hedge fund, Relational Investors, may have the upper hand. "We certainly are happy to see the price move up the way it has," said Bill Frels, portfolio manager of St.

Paul-based Mairs Power Growth Fund, which owns 2.9 million shares of Ceridian, according to government filings. "The stock looks a little ahead of itself on a fundamental basis.

We're taking a 'wait-and-see' attitude. ..

. Kathy brings some expertise and a fresh look to Ceridian. She's got some good ideas.

Our preference would be to give her a chance. But the board has a duty to shareholders." Marinello and Ackman, the central players, weren't talking publicly last week.

In a conference call with analysts after Ceridian reported strong 2006 financial performance on Feb. 13, Marinello said her board has undertaken with its advisers a process designed to "fairly assess all options and do what is right for Ceridian and its shareholders. This is the right move by the board and the right step for our company at this time.

" The Wall Street analysts who follow Ceridian have largely been approving of Marinello and had raised their performance and stock price outlooks based on fundamentals, key hiring and her early initiatives to improve long-term performance. Mark Marcon, at Robert W. Baird in Milwaukee, increased Ceridian's target price earlier this month to $36 per share over the next year on improving business fundamentals and wider profit margins that increased earnings 39 percent to $1.

20 per share in 2006. Earnings are projected to grow about 15 percent a year for the next couple of years. "Ceridian's stock has had quite a good run because of improved fundamentals as well as speculation," he said.

Some observers speculate about the sale of Comdata to big First Data Corp., American Express or a private equity group -- or perhaps the sale of Ceridian's larger but less profitable human resources business to huge ADP or another competitor. Comdata, based in Tennessee, already runs like a charm, generating 30 percent of revenue and 52 percent of operating earnings and growing at about 15 percent annually.

It supplies the electronic brains behind gift cards, gas cards and other electronic-payment products. Marinello was brought in to fix the human resources business, where the biggest unit is U.S.

payroll processing. She's accelerating a plan of increased customer retention and lower, lighter, more focused spending on technology. Ackman, 40, went public with his dissent after a disputed January meeting with Marinello.

Ackman reportedly complained that the new CEO didn't have the insight into the human resources business to really fix it and pooh-poohed his spinoff idea. Marinello has denied that. And Ceridian loyalists speculate that Ackman, a guy who likes to shake things up, came in spoiling for a fight.

Regardless, the Ceridian board must believe that Ackman's team has enough insight and clout with investors to warrant this review of alternatives. If it didn't, it would have told him to get lost. The consensus seems to be that the board is going to make the moves Ackman wants -- or risk losing an embarrassing proxy fight in the spring.

This dispute is less about Marinello than what she inherited at Ceridian from former CEO Ron Turner and his board. Marinello, 51, who signed on for a base salary of $780,000 and a bonus that will top that it if she meets her first-year objectives, gets praise from many as a proven operator at several big banking and other jobs. That includes former GE boss Jack Welch, who called her a strong, focused manager.

"If [Ackman] wants a turnaround, or he wants to improve margins, he's got somebody who can improve margins," Welch declared in Barron's last week. Star Tribune. All rights reserved.


425 Portland Av. S.

Read more on by www.startribune.com. All rights reserved.
Related news
Post comments
Name
Place
9 + 1 =
Comments