Changes Coming at Ceridian?

Ackman's Pershing Square, the hedge-fund firm run by William Ackman, bought an 11.3 percent stake (15.7 million shares) in Ceridian, pushing the company's shares to their biggest gain in 20 months - $28.22 as of Dec 20, 2006. Pershing Square won't seek to change or influence control of the company, according to a filing today with the U.S. Securities and Exchange Commission. Pershing Squire is now Ceridian's second-largest shareholder after Janus Capital Group (Denver-based mutual-fund company).

According to Bloomberg: ".....Pershing usually invests in as many as a dozen companies in a year and presses for changes at one or two of them. Pershing wants McDonald's Corp., the world's biggest restaurant chain, to spend less on its outlets and more on dividends and share buybacks. It wants Borders Group Inc. to sell or abandon the company's Waldenbooks mall-based stores. Hedge funds are largely unregistered pools of capital that cater to wealthy individuals and institutions and allow managers to participate substantially in profits from investments....".

According to SEC Investor: "..Perishing Square has only filed a 13G indicating that this is only a passive investment. However, activist hedge funds occasionally use this filing type to acquire shares quietly before taking a more active stance, since it does not require a "Purpose of Transaction". If and when Pershing Square takes a more active stance in the company, it will be forced to file a 13D with the SEC which will outline its investment objectives. Given Bill Ackman's background, this is a distinct possibility, and definitely a stock worth watching..".

This is a good news bad news situation for Ceridian. The good news is that we believe Pershing Square views Ceridian as an undervalued company. And we would agree. The bad news is that if Pershing Square has its way, some painful changes may be coming at Ceridian - more than just executive changes. But it may be a blessing in disguise for Ceridian and their stakeholders.