Ultimate Software agrees to $11 billion buyout by investor group

(Reuters) – Ultimate Software Group Inc, a cloud-based human resources applications developer, said on Monday it agreed to be bought by an investor group led by private equity firm Hellman & Friedman for about $11 billion.

The $331.50 per share all-cash offer is at a premium of 19 percent to the HR software provider’s closing share price on Friday.

The investor group also includes Blackstone Group LP, GIC Pte Ltd, Canada Pension Plan Investment Board (CPPIB) and JMI Equity.

HR software makers are benefiting from the growing tendency among enterprises to shift to cloud-based applications in a move to manage their payroll and human resources.

Ultimate Software competes with its rivals, including Workday Inc, Automatic Data Processing Inc and Oracle Corp, to sell software to companies to help manage their employees.

The size of the industry, known as cloud human capital management, is expected to touch $22.17 billion in 2023 from $13 billion in 2016, according to a report by Allied Market Research.

While there have been few big deals among the HR software makers in the last decade, Workday last year bought smaller Adaptive Insights Inc for about $1.55 billion a week before it was slated to go public.

The last big deal in the sector was in 2011 when Europe’s top technology company SAP SE bought human resources company SuccessFactors for $3.4 billion.

Hellman & Friedman had earlier taken human resources management software maker Kronos Inc private in 2007 for $1.8 billion. Blackstone also owns benefits and HR platform Alight Solutions LLC.

Ultimate Software, which generated more than $1.1 billion in 2018 revenue, expects the deal to close in mid-2019. The company can also consider alternative offers in a 50-day “go-shop” period.

Upon completion of the deal, privately held Ultimate Software will be managed by its existing management led by Chief Executive Officer Scott Scherr.

Goldman Sachs & Co LLC acted as financial adviser to Ultimate Software, while Qatalyst Partners was the financial adviser to the investor group.

Shares of Ultimate Software surged 18.7 percent to $330 in premarket trading.