ADP Plans to Spin Off Dealer Services Business
Roseland, N.J. — ADP, a global provider of human capital management (HCM) solutions, approved a plan to separate its Dealer Services business into an independent, publicly traded company through a tax-free spinoff of 100% of the business to the firm’s shareholders.
"Consistent with our strategy to grow our position as a global provider of HCM solutions, we have concluded that the separation of Dealer Services will allow both companies to focus on their respective industries," said Carlos Rodriguez, president and CEO, ADP. "The Dealer Services business remains attractive in terms of long-term growth opportunities; however, we believe this transaction will benefit ADP's shareholders by allowing each management team to better focus on its own business and strategic opportunities.”
ADP’s Dealer Services business unit is a global provider of retail and digital marketing solutions to automotive retailers and manufacturers. Officials said the continued recovery of the U.S. economy, combined with Dealer Services’ global reach and depth of service offerings, made it an appropriate time to establish the business as its own standalone company.
With revenues approaching $2 billion annually, along with strong profitability and cash flows, officials expect the standalone business unit to deliver solid long-term growth prospects. Steve Anenen and Al Nietzel, the business unit’s current president and CFO, respectively, were named CEO and CFO of the new standalone company.
In conjunction with the spinoff of the Dealer Services business, ADP expects to receive in a tax-free manner at least $700 million, proceeds ADP plans to return to its shareholders through share repurchases after the spinoff is complete. And once completed, according to officials, ADP expects to maintain its current $0.48 quarterly cash dividend per share. Over the medium to long term, ADP intends to return to its pre-separation target dividend payout ratio of 55% to 60%, while keeping intact the company's 39-year track record of annual increases in its quarterly cash dividend, subject to approval by ADP's board of directors.
ADP officials said they expect to complete the separation of the two companies in the early part of the fourth quarter.
“ADP's ongoing efforts and commitment will be focused on executing against our global HCM strategy,” Rodriguez added. “As we deliver against this commitment, our goal of driving consistent and sustainable profitable revenue growth and return of capital to shareholders through dividends and share repurchases remains."
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