Two Big Workplace-Software Providers to Merge -- 2nd Update
February 20 2020 - 12:41PM
Dow Jones News
By Miriam Gottfried and Cara Lombardo
Ultimate Software and Kronos Inc. are merging in a deal creating
a big new player in workplace-software products.
The all-stock deal will create a company worth roughly $22
billion including debt, the companies said Thursday, confirming an
earlier Wall Street Journal report.
Hellman & Friedman, the private-equity firm that controls
both closely held companies, will remain the controlling
shareholder, while Blackstone Group Inc., which owns stakes in
both, will be the largest minority investor in the combined
company.
Kronos CEO Aron Ain will lead the combined company, which will
have more than 12,000 employees and dual headquarters in Lowell,
Mass., and Weston, Fla.
Ultimate Software develops cloud-based subscription software
aimed at corporate human-resources departments. Its offerings
include the UltiPro suite of products that allow employees to
access tax documents and pay stubs. Kronos software helps companies
with absence and performance management.
The combined company would have about $3 billion in annual
revenue.
Hellman & Friedman paid about $11 billion last year to take
Ultimate Software private and bought Kronos in 2007 in a
transaction valued at roughly $1.8 billion.
"We have two remarkable leaders in the human-capital-management
space that are so complementary to each other, it's almost scary,"
Mr. Ain said in an interview. He said the two businesses have only
3% overlap in their customer base, creating an opportunity for them
to cross-market their products.
He said there will also be a significant new opportunity for the
businesses to grow together into new geographies and offerings and
that the combined company plans to add over 3,000 employees in the
next three years.
The merged company's size and growth profile make it a candidate
for an initial public offering down the road.
With offices in San Francisco, New York and London, Hellman
& Friedman has a strategy of making large-scale, concentrated
bets on a relatively small set of companies in areas in which it
has expertise. It has a long history of investing in
software-related businesses, including DoubleClick Inc., which it
sold to Google in 2008, and Nasdaq Stock Market LLC, which it
exited in 2007.
Kronos has been a successful investment for Hellman &
Friedman, delivering returns of 13 times over the 13 years it has
been in the firm's portfolio, according to David Tunnell, a partner
at the buyout firm who leads its software investments.
"This is an example of how we try to offer long-term support to
high-quality growth companies," Mr. Tunnell said in an
interview.
For Blackstone, the investment in Ultimate was part of its
recent focus on putting money into fast-growing companies -- a
strategy that the private-equity giant's President Jonathan Gray
has embraced as a way to navigate an expensive market. Other recent
so-called growth investments include Blackstone's 2019 deals for a
majority stake in MagicLab, which owns dating app Bumble, and
mobile performance marketing platform Vungle.
Write to Miriam Gottfried at Miriam.Gottfried@wsj.com and Cara
Lombardo at cara.lombardo@wsj.com
(END) Dow Jones Newswires
February 20, 2020 12:26 ET (17:26 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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