Under the terms of the deal, Roseland, New Jersey-based ADP will pay $17 per share for the entire outstanding stock in Pleasanton, California-based ProBusiness Services, or a total of $500m in cash, representing a premium of 2.9 times the company’s $170m 2001 annual revenue.
ProBusiness provides back-office processing services such as payroll and tax administration, human resources, benefits administration, and web-based HR services for 760 clients including America Service Group, Essex Property Trust, TransUnion, Qualcomm, Autodesk, Intuit, Yahoo and National Semiconductor. ADP said it plans to pool the business into its existing Employer Services division, which provides payroll, tax filing and benefits administration services.
The move by ADP to consolidate the back-office processing market is an attempt to compete on a more level footing with major IT services rivals like EDS, Accenture and IBM Global Services, which are actively targeting the administration processing and business process outsourcing (BPO) space as part of their overall outsourcing contracts. Last January, Cap Gemini Ernst & Young won a $642m project with Hydro One Networks Inc to provide payroll and customer service administration as part of an overall outsourcing project, and in the largest deal to date, IBM Global Services signed a $6bn outsourcing project in late 2001 with automaker Fiat, which has payroll processing as a core component.
During its most recent quarter ended September 30, ProBusiness trimmed its operating loss to $3.3m compared to an operating loss of $10.4m in 2001, on revenue that remained more or less flat at $40.3m. ADP said that the acquisition would dilute earnings by $0.01 per share in the first year of trading and then be accretive in the second year.
Source: Computerwire
