ADP's New Spin-Off, One to Watch

Automatic Data Processing, Inc. (ADP-NYSE) has approved today the proposed spin-off of its Brokerage Services Group business to ADP’s shareholders. The spin-off will result in a separate publicly traded company that will be called Broadridge Financial Solutions, Inc. that will eventually trade under the NYSE ticker "BR."

This is going to be set as a tax-free spin-off dividend on a 1 share of BR for every 4 shares of ADP, so 25 shares of "BR" for every 100 shares of "ADP."  The distribution is expected to occur as of the close of business on March 30, 2007.  Shareholders who own fewer than four shares of ADP common stock (or who do not own multiples of four shares) will receive a TAXABLE cash payment in lieu of the fractional share to which they would otherwise be entitled.  So if you own odd lots on this then this may not be an entirely tax-free transaction.

A when-issued trading basis is expected on the NYSE around March 22, 2007.  Prior to the spin-off, Broadridge expects to enter into a new credit facility and to use $690 million of proceeds from the facility to pay a dividend to ADP. ADP will use these funds, together with approximately $60 million distributed from its Canadian subsidiaries, to repurchase shares of ADP through open market purchases, self tenders or other targeted share repurchase transactions during the 12 months following the spin-off.

This is part of ADP’s ongoing strategy to focus on core operations.

Jon C. Ogg
March 9, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.