On Wednesday, UBS analyst Kevin McVeigh adjusted the price target for Alight Solutions (NYSE:ALIT) shares to $13.00, up from the previous $12.00, while reaffirming a Buy rating on the company's stock. This change comes in response to Alight Solutions' recent definitive agreement to divest its Professional Services segment and Payroll & HCM Outsourcing businesses to an affiliate of H.I.G. Capital.
The transaction, which is anticipated to be finalized by mid-2024, involves a sale price of up to $1.2 billion, comprising $1 billion in cash and $200 million in seller notes. The latter includes $150 million contingent on the business unit's performance in 2025. The deal has received the green light from Alight’s Board of Directors.
According to the analyst, the sale values the Payroll & Professional Services business at approximately 10 times the 2023 adjusted EBITDA and 24 times the 2023 unlevered free cash flow. A noteworthy aspect of the agreement is the establishment of a commercial partnership between Alight and the sold business units.
Alight Solutions has outlined its plans for the net after-tax cash proceeds from the sale, intending to allocate the funds towards debt reduction, capital return to shareholders, and general corporate purposes. These include reinvesting into growth opportunities that may arise.
Furthermore, Alight Solutions has announced an authorization to repurchase up to an additional $200 million of its stock, bringing the total authorized amount for stock repurchases to $248 million. This move underscores the company's confidence in its financial strategy and commitment to delivering value to its shareholders.
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