Elliott Management Urges CDK Global to Trim Costs, Buy Back Shares

Elliott Management said CDK Global Inc. should trim costs and buy back more of its stock to drive value for shareholders, according to a letter the activist investor sent to the company's board.

In the letter dated Wednesday, Elliott said CDK Global, a provider of IT and digital marketing products to auto retailers, should improve efficiency through moves such as limiting the management layers between senior and junior members of the company and operating out of low-cost locations. It also proposed a $1 billion share buyback program.

Elliott said the company hadn't realized enough cost savings under its margin-improvement plan and called the company's $250 million share buyback program "small."

Elliott said it owns an 8.6% stake in CDK. A representative from CDK couldn't immediately be reached for comment.

CDK Global was spun off from Automatic Data Processing Inc. in 2014.

"CDK has had over two years to develop an appropriate business plan as a stand-alone company and execute swiftly against it," Elliott said.

In March, CDK Global announced that Brian MacDonald would take over as chief executive, after the company said in December that Steven Anenen would step down from the role. Elliott said in the letter that it "had the chance to spend time" with Mr. MacDonald, and "enjoyed this dialogue." Elliott also praised CDK's chairman, Leslie Brun.

Shares of the company rose 4.1% in morning trading. They are up 9.7% in the past three months.

Write to Joshua Jamerson at [e-mail]

(END) Dow Jones Newswires

May 04, 2016 10:45 ET (14:45 GMT)

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