This one is interesting.
TriNet Group (an HR outsourcing firm) announced today that it will buy Gevity HR (a PEO). As part of the deal, Gevity also agreed to be taken private.
TriNet paid $98 million in cash or $4.00 per share for Gevity which was almost double Gevity's closing price of $2.03 on Wednesday - a 97 percent premium!
So naturally, Gevity's stock rose 90 percent today. Wow.
The deal was backed by TriNet's largest shareholder (and a shareholder of Gevity - surprise, surprise), General Atlantic Partners. Remember these guys? They've been a big early investor in HR companies since the early 1980s. Their most notorious (for the average non-insider shareholder) was Exult, one of the first HR BPOs that was essentially created by GA and offered to the public at $10 per share in 2002 and then sold to Hewitt in 2004 for about $6.30 per share. I don't believe Exult ever made a profit.
Gevity's Chairman and Chief Executive Officer, Michael J. Lavington, commented that "The Company's board of directors has concluded a lengthy evaluation of numerous strategic alternatives to enhance shareholder value and has concluded that joining forces with TriNet is in the best interests of our shareholders."
Shareholders? Gevity went public in 1997 for $15.41 and traded for around $30 per share in early 2006 and closed yesterday at around $2. For many long term shareholders even a 97% rise in stock today means little.
Obviously General Atlantic and Trinet feel Gevity's securities have been undervalued by investors - by at lot! And only time will tell if this is the case. I hope they are right because that would mean lower unemployment and overall great things for the entire HR marketplace - down the road. In Gevity's last publicly available financials for the period ending Sep 2008 they reported a net loss of about $2 million on revenues of $125 million. Their annual revenue in 2007 was about $605 million so on the surface paying a multiple of about .17X revenue is a steal for Trinet and GA. And it won't take much in the form of a future IPO or sale to make this back in multiples.
But my hunch is, like so many of these high finance deals, there is no way this benefits anyone but the private equity folks and other insiders in the long term. Lets just hope it doesn't hurt the customers too much. I wish all parties success. And congratulations to anyone who bought Gevity in December of 2008.
IPOs in the HR Space: Should I Stay Private or Go Public?
Labels: IPO, private equity