ROCHESTER, N.Y. - Paychex, Inc. (NASDAQ: PAYX), a leading human capital management company with a market capitalization of $49 billion and impressive gross profit margins of 71.8%, has announced an agreement to purchase Paycor HCM , Inc. (NASDAQ: NASDAQ:PYCR), a provider of HCM, payroll, and talent software, for $22.50 per share, or roughly $4.1 billion. The boards of both companies have approved the transaction unanimously. According to InvestingPro analysis, Paychex maintains a strong financial health score of GOOD, supported by its robust cash position and dividend history.
The acquisition is set to strengthen Paychex's offerings in the HCM market and expand its capabilities, particularly for larger organizations. Paycor, based in Cincinnati, Ohio, employs approximately 2,900 people and serves over 49,000 clients, supporting around 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, highlighting its potential to enhance the company's upmarket position 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 post-close and accretive in the second fiscal year and beyond.
Raul Villar, Jr., CEO of Paycor, also commented on the acquisition, stating that the combined expertise and resources of both companies would benefit customers and stakeholders.
Financially, the deal represents a premium of approximately 19% over Paycor's 30-day volume-weighted average trading price as of January 3, 2025. Paychex has secured committed financing for the transaction, which is anticipated to close in the first half of 2025, subject to regulatory approvals and customary closing conditions. For deeper insights into Paychex's valuation and financial metrics, InvestingPro subscribers can access comprehensive research reports covering over 1,400 US stocks, including detailed analysis of this acquisition's potential impact on shareholder value.
Pride Aggregator, LP, an affiliate of Apax (HN:IBC) Partners LLP and the majority shareholder of Paycor, has approved the deal through written consent. Paychex's financial advisor for the transaction is J.P. Morgan Securities LLC, with Davis Polk & Wardwell LLC serving as legal advisor. Paycor's financial advisor is Goldman Sachs & Co. LLC, with Kirkland & Ellis LLP as legal advisor.
The acquisition is expected to bring cost synergies exceeding $80 million in the near term and substantial revenue synergies in the coming years. Paychex remains committed to its dividend policy and maintaining a strong balance sheet.
The details of the transaction were discussed in a conference call on January 7, 2025. This news is based on a press release statement.
In other recent news, Paycor HCM Inc. has been making headlines with reports of advanced acquisition discussions with Paychex Inc (NASDAQ:PAYX). This potential deal, if confirmed, would mark a significant consolidation in the human resources software and services market. Analyst Scott Berg from Needham suggested that if the deal goes through, a valuation of 6x - 7x FY25 revenues could be expected. This follows a similar move by Automatic Data Processing Inc (NASDAQ:ADP)., which acquired WorkForce Software (ETR:SOWGn), indicating a trend in the sector.
Turning to Paychex Inc., the company recently reported second-quarter fiscal 2025 results that surpassed analyst expectations. The company's adjusted earnings per share came in at $1.14, beating the consensus of $1.13. Revenue for the quarter rose 5% year over year to $1.32 billion, slightly above the expected $1.31 billion. The company's Management Solutions revenue, its largest segment, increased 3% to $962.9 million, while its PEO and Insurance Solutions revenue saw a stronger 7% growth to $317.9 million.
These are among the recent developments for both companies, which have garnered considerable attention in the market.
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