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Paychex to buy NBS

Paychex Inc. today announced an agreement to merge with National Business Solution Inc. of St. Petersburg, Fla.
Outstanding shares of NBS are to be exchanged for some 3 million shares of Paychex common stock. The transaction will be accounted for as a pooling of interests.
The deal is pending favorable judgment on filings made under the Hart-Scott-Rodino Act and approvals required by the Florida Business Corporation Act.
NBS is a professional-employer organization, meaning it becomes a co-employer of client’s workers and then manages employee benefits for small and midsize companies.

Paychex to buy NBS

Paychex Inc. today announced an agreement to merge with National Business Solution Inc. of St. Petersburg, Fla.
Outstanding shares of NBS are to be exchanged for some 3 million shares of Paychex common stock. The transaction will be accounted for as a pooling of interests.
The deal is pending favorable judgment on filings made under the Hart-Scott-Rodino Act and approvals required by the Florida Business Corporation Act.
NBS is a professional-employer organization, meaning it becomes a co-employer of client’s workers and then manages employee benefits for small and midsize companies. NBS has pooled more than 9,000 employees, and, in most instances, its leveraged purchasing power and management expertise has improved clients’ benefit programs while cutting costs.
“We have been following the progress of the PEO industry for many years and feel the time is right for Paychex to aggressively enter this marketplace, which is a natural extension of our current payroll and human-resource services,” said Thomas Golisano, chairman and CEO of Paychex, in a prepared statement.
“We are extremely excited about the prospects of bringing together our marketing organization and the potential of our client base, which now exceeds 234,000 companies, with the resources, capabilities and expertise of NBS, one of the leading companies in the PEO industry,” he added.
Paychex prepares payroll checks, internal accounting records and payroll-tax returns for small and midsize companies. NBS performs human-resource administration, employment regulatory compliance, workers’ compensation coverage, health care and 401(k) administration for its clients.
Paychex does not anticipate the merger will have a dilutive effect on future earnings. For the 12 months ended May 31, NBS was profitable and generated approximately $240 million in revenue.
For the year ended May 31, Paychex expects a 20 percent increase in revenue and a 33 percent in net income, Golisano said. Last year, the company earned $39 million, or 58 cents a share, on revenue of $267.2 million.
Fourth-quarter revenue is expected to increase 20 percent, and net income 35 percent, in line with analysts’ expectations. In the same period last year, the company earned $10.5 million, or 15 cents a share, accounting for May’s 3-to-1 stock split. The company had $71.8 million in revenue during that period.
Golisano attributes the anticipated increase in fourth-quarter and fiscal 1996 earnings to added services and new clients. The company expects to report fourth-quarter and full-year earnings next week.
Golisano predicts that the company will gain 2,000 to 3,000 customers over the next year.
One reason is the Internal Revenue Service’s Electronic Federal Tax Payment System. The new system–which goes into effect Jan. 1–requires businesses that paid more than $50,000 in payroll taxes in 1995 to electronically deposit their payroll and federal depository taxes. Paychex has offered this service for several years.
In addition, Golisano said he foresees an increase in the usage of the company’s 401(k) Recordkeeping Service.

RBJ Daily 6-25-96

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