Ceridian Corp. (NYSE:CEN) shares rose marginally this morning after Bill Ackman's Pershing Square disclosed a 14.9% stake in the company and updated shareholders on its plans in a Schedule 13D/A filing with the SEC. The Minneapolis, MN-based company announced a $36/share management-led buyout earlier this year that Ackman finds grossly inadequate. The activist investor proposed a range of alternatives that it believes would likely result in greater value for shareholders. Investors are watching the situation closely, but the hedge fund still faces an uphill battle against the board and management.

Bill Ackman's heated battle with Ceridian has been taking place for several months now and he shows no signs of letting up. The activist investor initially proposed that the company spin-off its Comdata division as it is undervalued and shares few synergies with the rest of the company's business segments. Ackman also proposed a recapitalization of the company that would enable it to issue a special dividend or institute a share buyback. Finally, he also believes that the company could attract a greater premium if it continued to shop itself. In fact, his firm reportedly knows of several interested parties!

Many investors share Ackman's belief that these transactions could provide substantial returns; however, the Ceridian board has remained resistant. As a result, Ackman was forced to nominate a slate of directors to replace the incumbents and enforce change. A recent shareholder lawsuit also led to a lower threshold for a "superior proposal" and the elimination of a buyer's walkaway rights in the event that the incumbent board loses in the next proxy season. In the end, if Ackman is successful in nominating his own candidates to the board or directors there is a good possibility that we could see a higher share price.

So, what are the changes that these proposals will be adopted? Well, a lot rides on Ackman's ability to win the upcoming proxy contest. With nearly 15 percent of the company's shares in his hands along with call options that he disclosed in the past, there is a distinct possibility if he can garner other institutional support. The activist investor asked the company yesterday for additional information to make its case, even if it would require a confidentiality agreement. Consequently, the next thing investors should watch for is an 8-K filing by the company disclosing that they have entered into such an agreement. Combined, these factors make CEN a stock worth watching!

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