Paychex, Inc. ( PAYX ) shares are trading higher on Tuesday after the company disclosed a deal to fully acquire Paycor HCM, Inc. ( PYCR ) in an all-cash transaction representing an enterprise value of around $4.1 billion.

Paychex ( PAYX ) will acquire Paycor for $22.50 per share, which represents a 19% premium over Paycor’s 30-day volume-weighted average trading price as of January 3, 2025.

The Apax Funds acquired a majority stake in Paycor in November 2018 for $1.3 billion and took the company public in July 2021. 

Paychex ( PAYX ) plans to maintain its dividend policy and strong balance sheet, with committed financing in place for the transaction, which will be supported by incremental debt.

The agreement has been unanimously approved by the Boards of Directors of both companies. The acquisition is expected to close in the first half of 2025, pending regulatory approvals and other customary closing conditions.

The deal is expected to generate over $80 million in cost synergies and significant revenue synergies, with the acquisition being neutral to slightly accretive to EPS in the first fiscal year and accretive thereafter.

The acquisition is expected to create a comprehensive HCM portfolio, enhancing Paychex’s ability to serve all customer segments.

Paycor’s upmarket strength complements Paychex’s existing position, expanding sales coverage and growth opportunities through strategic partnerships.

John Gibson, President and CEO of Paychex ( PAYX ) highlighted that acquiring Paycor will enhance Paychex’s upmarket capabilities, broaden its AI-driven HR technology, and provide new growth opportunities.

As of November 30, 2024, PAYX had $1.3 billion in cash and investments and $841.1 million in operating cash flow for the six months.

Investors can gain exposure to the stock via USCF ETF Trust USCF Dividend Income Fund and WBI BullBear Value 3000 ETF ( WBIF ) .

Price Action: PAYX shares are up 2.11% at $138.93 at the last check Tuesday, while PYCR is down 3.06%.

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