By Michael Calia
Automatic Data Processing Inc. (ADP) on Thursday said it plans
to separate its dealer services business, which is focused on
marketing for auto dealers and manufacturers, into an independent,
publicly traded company.
Shares of ADP rose 4% to $78.94 in recent premarket trading.
The company said the move will allow it to focus more on its
core employer-services business.
The separation, which comes at a time of growing automobile
demand, would occur in the form of a tax-free spinoff to
shareholders, the company said, adding that it expects to receive
at least $700 million in proceeds. ADP said it would then use the
proceeds for share buybacks.
The dealer-services unit accounted for 16% of the company's
total revenue in the most recent period, according to ADP's fiscal
second-quarter earnings release in February.
"The dealer services business remains attractive in terms of
long-term growth opportunities," Chief Executive Carlos Rodriguez
said. "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 business includes operations from payroll management to
employee-benefits administration and the outsourcing of
human-resources tasks. The company's core results have improved in
recent periods.
ADP in February increased its estimate for the current year's
revenue growth, based on the company's strong performance in the
first half of the year. It maintained its earnings forecast.
Write to Michael Calia at michael.calia@wsj.com
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