ADP will spinoff its Dealer Services division, including Lightspeed, into a separate publicly traded company focused on the vehicle industries.
The company’s board of directors approved a plan to separate the Dealer Services business through a tax-free spinoff of 100 percent of dealer services to ADP shareholders.
“At this point Dealer Services is focused on offering our clients integrated solutions to better manage inventory and more cost-effectively manage their businesses,” said ADP CFO Jan Siegmund. “Part of the rationale is that dealer services has been expanding the offerings. We have entered digital marketing support for dealers. We had a fairly comprehensive strategy to expand services for dealers. The more you expand, the more you get away from the core business of ADP.” The spinoff should let the dealer services company focus on developing products and services specific to vehicle markets, he added.
Steve Anenen and Al Nietzel, the current president and CFO, respectively, of Dealer Services, will become CEO and CFO of the new standalone company.
Dealer Services is a global provider of retail and digital marketing solutions to automotive and powersports retailers and manufacturers. With revenues approaching $2 billion annually, most of which is recurring in nature, along with good profitability and strong cash flows, the company expects Dealer Services will be an independent public company with solid long-term growth prospects.
“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, ADP president and CEO. “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 ongoing efforts and commitment will be focused on executing against our global HCM strategy. As we deliver against this commitment, our goal remains driving consistent and sustainable profitable revenue growth and return of capital to shareholders through dividends and share repurchases.”
In conjunction with the spinoff, ADP expects to receive in a tax-free manner at least $700 million, which proceeds ADP plans to return to its shareholders through share repurchases after the spinoff is complete, depending on market conditions. ADP expects to complete the separation in the early part of the fourth quarter of 2014.
