TH Lee, FNF to pay $5.3bn for Ceridian

TH Lee and Fidelity have teamed up again to buy a business services provider, inking a $5.3 billion deal for Ceridian, a company in the trendy payment processing space.

Insurance management firm Fidelity National Financial and buyout shop Thomas H Lee Partners are set to acquire Ceridian in an all-cash deal valued at $5.3 billion (€4 billion). Minneapolis, Minnesota-based Ceridian has a human resource solutions division, providing services such as payroll processing and benefits administration, as well as a division focused on payment processing for US retail and trucking industries.

TH Lee and FNF will jointly invest in the company, though expect to bring in co-investors. While exact ownership ratios were not disclosed, the firms said in a statement that FNF will own less than 50 percent of Ceridian, and “will treat the Ceridian investment under the equity method of accounting for financial statement purposes, similar to its minority ownership stake in Sedgwick CMS”.

FNF, TH Lee and Evercore Partners purchased business services firm Sedgwick last year for $635 million. The three firms, along with TPG and Banc of America, also co-invested $500 million in Fidelity National Information Services, a Fidelity subsidiary spun-out from Certegy.

“Ceridian has a profile similar to that of Alltel Information Services, which we acquired in 2003 and used as the cornerstone in building what is now Fidelity National Information Services, a nearly $10 billion market cap company,” FNF chairman and chief executive, William Foley, said in a statement.

Under terms of the Ceridian agreement, shareholders will receive $36 per share, representing a 17 percent premium over the company’s closing share price on 12 February, the day prior to Ceridian’s announcement it would explore strategic alternatives.

The transaction – subject to shareholder, antitrust and regulatory approvals, as well as certain closing conditions – is expected to close in the fourth quarter, following a financing marketing period. Deutsche Bank and Credit Suisse have already provided “firm” financing commitments.

Greenhill is the financial advisor for, and has given a fairness opinion to Ceridian, while Wachtell, Lipton, Rosen & Katz is its legal advisor. Deutsche Bank is providing financial advice to the buyers, while Weil, Gotshal & Manges is providing legal counsel.

US private equity firms have lately been purchasing electronic payment-related companies en masse. In the past two months, The Blackstone Group inked a deal for Alliance Data worth $7.8 billion, Kohlberg Kravis Roberts agreed to buy First Data for $29 billion, Warburg Pincus agreed to acquire Megavante for $625 million, and General Atlantic bought a minority stake in the Global Electronic Trading Company for an undisclosed amount.