Deason and investment partner Cerberus Capital Management are offering $5.93 billion in cash to take the Dallas-based IT company private, according to a March 20 letter to ACS’ board of directors. The price represents a premium of 15.5 percent over the closing price Monday, March 19, of $51.29 on the New York Stock Exchange.
“We believe that our proposal is fair and in the best interests of the Company and its public shareholders and that the shareholders will find the proposal attractive,” states the March 20 letter from Deason and Cerberus to ACS’ board.
“The board will evaluate the offer in due course,” says Mike Buckley, a spokesman for ACS. He declined to elaborate.
Under the proposal, Deason will remain chairman and ACS management will remain in place.
Last year a number of private equity firms, such as Blackstone Group, Bain Capital and Texas Pacific Group, were in talks to take ACS private, but the discussions fell through.
Now, however, observers say it looks like it might happen given the fact that Deason is one of the buyers.
And given the public scrutiny around ACS, it makes sense for the company to want to go private, observers say. Last year, ACS got caught in the options backdating scandals when regulators uncovered that executives intentionally backdated the effective dates of their stock options to a date when the stock hit a low point to make the options more valuable when exercised.
CEO Mark King and CFO Warren Edwards resigned over the scandals and the firm had to restate earnings for the past 11 years.
Going private will enable ACS to focus on growing without the burden or public scrutiny, experts say.
“The big question is, who is next?” says Stan Lepeak, managing director of research at EquaTerra, a Houston-based advisory firm.
But Lepeak says that while private equity investors are interested in scooping up smaller HRO players, particularly those in the recruitment process outsourcing space, there isn’t a lot of interest in larger HRO providers.
“Hewitt is a possibility,” he says, noting rumors that bankers had been eyeing the Lincolnshire, Illinois-based company.
While the market might not see a wave of public HRO providers go private, privately owned HRO providers will probably put off their initial public offerings until the market gets better, says HRO specialist Phil Fersht.
“There are some select Indian providers who are pushing to [do an] IPO as soon as they can, but I anticipate this to slow down as valuations go through a correction later this year,” he says.
If the board approves the proposal by Deason and Cerberus, the investors hope to finish the transaction in early May, according to their letter to the board.
click here to view ACS’ 8k filing with Securities and Exchange Commission.