Wednesday, July 04, 2007

Hit #169 (Ceridian)

Ceridian (CEN) got a $5.3 billion cash offer from Fidelity National Financial and Thomas H. Lee Partners. The deal may yet be in trouble due to strong opposition from a large holder, Pershing Square Capital, who contends, rightly, that the offer is too low.

The $36/share offer translates to a gain of 102% over my average cost of $17.79.

Like a number of other investments, my first encounter with Ceridian (as my employer's payroll processor) was what piqued my interest. Along the same lines, I have invested in, and would still be a buyer of, Administaff (ASF), which would make for a very nice target for someone like Paychex or Fidelity.

A few others in this sector are also worth looking at. Paychex (PAYX) at its current price provides an attractive entry point for long term buy-and-holders. H & R Block (HRB), which has tried to offer payroll processing but with limited success so far, is also a good investment, both as a takeover target and as a turnaround candidate after its recent exit from subprime lending. H & R Block will be a perfect buyer for Administaff as a pathway into payroll processing.

Automatic Data Processing (ADP), the largest player in the sector, recently spun off Broadrange Financial (BR). The latter is likely to be taken out down the road, and makes for a good buy today.

Previous hit - Acxiom(#168)


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