Private Equity Firm Shells Out $5.3 billion for Ceridian

By Staff Report

May. 31, 2007

Ceridian Corp. has accepted a $5.3 billion buyout, making it the latest among a number of HRO providers to go private.

The buyout offer was made by private equity firm Thomas H. Lee Partners and Fidelity National Financial, a Jacksonville, Florida-based insurance claim handler, and is expected to close in the fourth quarter.

The move may end the several-months battle between Minneapolis-based Ceridian and William Ackman, the founder of hedge fund Pershing Capital Management, who has come out publicly against Ceridian’s management style.

As a result, the company last fall named a new CEO, Kathryn Marinello. In February, Ceridian’s board of directors announced it had hired investment bankers to explore “strategic alternatives to enhance shareholder value,” according to a February 13 statement made by the board.

The $5.3 billion buyout represents a 17 percent premium over Ceridian’s stock level in February. It marks a 5 percent premium over Ceridian’s share price right before the deal was announced May 30.

Ceridian offers HRO services but has made a name for itself through its payroll processing. The company currently processes payments for more than 110,000 companies globally. Last year, Ceridian’s net income was $173.6 million, or $1.20 a share, on revenue of $1.57 billion.

Calls to Ackman and Fidelity were not returned. Peter Stoddart, a Ceridian spokesman, said it was premature to say what effect the acquisition would have on the company, but added that Marinello will remain in place. A spokeswoman for Thomas H. Lee Partners declined to comment.

Ceridian customers and prospective clients should be heartened by the move to go private, says Naomi Bloom, managing partner of outsourcing consultant Bloom & Wallace. Whether the investors fix up the company and sell it or make changes and keep it, Ceridian will be in a better position to invest in their delivery platform than it was under the scrutiny of shareholders, she says.

Ceridian customers should watch for which executives stay and which ones leave, Bloom says.

“I would pay attention to whether or not there is anyone left who understands HR BPO,” she says.

And it’s only a matter of time before more HRO providers follow suit. Affiliated Computer Services founder and chairman Darwin Deason has been working to take his company private.

In March, Kronos was acquired by private equity firm Hellman & Friedman Capital Partners for $1.8 billion.

“My immediate thought is, who is next?” says Neil McEwen, managing consultant at PA Consulting.

Read more about Ceridian.

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