ROCHESTER, NY – Paychex, Inc. (NASDAQ: PAYX), a leading human capital management company with a market capitalization of $49 billion and an impressive gross profit margin of 71.8%, announced an agreement to acquire Paycor HCM Inch. (NASDAQ: NASDAQ: ), a provider of HCM, payroll and talent software, for $22.50 per share, or approximately $4.1 billion. The management boards of both companies unanimously approved the transaction. According to InvestingPro analysis, Paychex maintains a strong financial health rating of GOOD, supported by its strong cash position and dividend history.
The acquisition is set to strengthen Paychex’s offering in the HCM market and expand its capabilities, particularly for larger organizations. Paycor, headquartered in Cincinnati, Ohio, employs approximately 2,900 people and serves more than 49,000 clients, supporting approximately 2.7 million employees in the United States. Paychex’s strong financial foundation, with more cash than debt on its balance sheet and a 37-year track record of consistent dividend payments, positions it well for this strategic expansion.
John Gibson, president and CEO of Paychex, expressed enthusiasm for the acquisition, noting its potential to enhance the company’s position in the high-end market and AI-driven HR technology. The transaction is expected to be neutral to slightly accretive to Paychex’s adjusted diluted EPS in the first fiscal year following closing and accretive in the second fiscal year and thereafter.
Raul Villar, Jr., CEO of Paycor, also commented on the acquisition, stating that the combined expertise and resources of both companies will benefit customers and stakeholders.
Financially, the deal represents a premium of approximately 19% to Paycor’s 30-day volume-weighted average trading price as of January 3, 2025. Paychex provided financing for the transaction, which is expected to close in the first half of 2025 subject to regulatory approvals and the usual closing conditions. For a deeper look into Paychex’s valuation and financial metrics, InvestingPro subscribers can access comprehensive research reports covering more than 1,400 US stocks, including a detailed analysis of the potential impact of this acquisition on shareholder value.
Pride Aggregator, LP, Subsidiary Apax (HN:) Partners LLP and majority shareholder of Paycor, approved the deal by written consent. Paychex’s financial advisor for the transaction is JP Morgan Securities LLC, and Davis Polk & Wardwell LLC is the legal advisor. Paycor’s financial advisor is Goldman Sachs & Co. LLC, with Kirkland & Ellis LLP as legal counsel.
The acquisition is expected to generate cost synergies in excess of $80 million in the near term and significant revenue synergies in the coming years. Paychex remains committed to its dividend policy and maintaining a strong balance sheet.
Details of the transaction were discussed in a conference call on January 7, 2025. This news is based on a press release.
In other recent news, Paycor HCM Inc. has made headlines with reports of advanced acquisition discussions with Paychex Inc (NASDAQ:). This potential deal, if confirmed, would mark significant consolidation in the HR software and services market. Needham analyst Scott Berg suggested that if the deal succeeds, a 6x – 7x revenue estimate could be expected in FY25. This follows a similar move by Automatic Data Processing Inc (NASDAQ: ), which acquired WorkForce Software (ETR:), indicating a trend in the sector.
As for Paychex Inc., the company recently reported results for the second quarter of fiscal 2025 that beat analysts’ expectations. The company’s adjusted earnings per share came in at $1.14, beating the consensus estimate of $1.13. Revenue for the quarter rose 5% from last year to $1.32 billion, slightly above expectations of $1.31 billion. The company’s revenue from management solutions, its largest segment, rose 3% to $962.9 million, while revenue from PEO and insurance solutions saw stronger growth of 7% to $317.9 million.
These are among the recent developments for both companies, which have attracted considerable attention in the market.
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