In March, ACS chairman Darwin Deason and Cerberus Capital Management proposed buying the company for $59.25 per share and subsequently upped their bid to $62 per share. Under the terms of the bid, Deason would work exclusively with Cerberus on the acquisition.
But on Sunday, June 10, ACS announced it had suspended a temporary exclusivity agreement with Deason and Cerberus Capital Management, thus opening the company for more bidding.
ACS’ board of directors said in a statement that it believes the waiver will “enable it to conduct a process for considering strategic alternatives available to the company, including a potential sale of the company, that it considers to be in the best interest of the company and its stockholders.”
Similarly, on Tuesday, June 12, Ceridian shareholder William Ackman, founder of hedge fund Pershing Square Capital Management, sent a letter to Ceridian shareholders encouraging them to oppose the $5.2 million buyout offer made last month for Ceridian by private equity firm Thomas H. Lee Partners and Fidelity National Financial.
“We do not support a sale of the company at this low price,” Ackman says in the letter, which was filed with the Securities and Exchange Commission. “It appears to us that the current deal is an ill-suited response to our proxy contest, and is suboptimal for Ceridian stockholders.”
It would make sense for ACS and Ceridian to open their bidding to other potential buyers given the state of the market, says Jason Corsello, vice president at Knowledge Infusion, a Minneapolis-based talent management consultant.
“There are a lot of private equity dollars out there,” he says. “If they can find other bidders that are willing to pay more, it makes sense.”
Private equity firms recognize that HR technology firms in general are in growth mode and that being a publicly held company during a period of growth is not ideal, says Phil Fersht, an HRO expert.
“Being public requires companies to be highly disciplined and try to squeeze margins as much as they can, which is hard to do when you are trying to grow,” he says. “Private equity firms recognize that and that’s why they are looking at this space.”
In a June 13 statement, Ceridian’s board of directors emphasized that it believes the buyout by Thomas H. Lee and Fidelity National Financial “was in the best interest” of shareholders, but said it would be open to future discussions with shareholders if they could come up with a better alternative.
“The board welcomes involvement by shareholders and is prepared to review any proposals that might result in a superior proposal per the merger agreement,” the board said in its statement.
And it’s possible both Ceridian and ACS could get better offers, Corsello says.
“These two firms have some great assets in terms of client base and brand,” he says. “I wouldn’t be surprised if other firms put in a bid.”