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Paychex (PAYX) Completes Oasis Outsourcing Acquisition

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Paychex (PAYX - Free Report) recently announced that it has completed the acquisition of Florida-based Oasis Outsourcing Acquisition Corporation for $1.2 billion.

Oasis is one of the largest privately owned professional employer organizations (PEO) in the United States and a leading provider of human resources (HR) outsourcing services. The combined entity is anticipated to serve more than 1.4 million worksite employees through its various HR outsourcing services.

The deal was announced on Nov 26.

Deal Benefits

The acquisition is expected to bolster Paychex’s PEO growth strategy and expand its PEO sales organization. It is also expected to provide a new client base for Paychex retirement and time and attendance products and help the company gain scale for new products through its insurance carrier partners.

Further, it is likely to expand Paychex's HR outsourcing and technology-enabled services and help it enter new markets. The combined entity is anticipated to deliver solid human resources and payroll solutions to clients and employees.

Addtionally, Paychex is optimistic about revenue synergies from this purchase. The company expects to witness an addition of $155-$175 million revenues in the remaining part of fiscal 2019 (ending May 31, 2019). While 45% of the incremental revenues should occur in the third quarter of fiscal 2019, the rest is expected to occur in fourth-quarter fiscal 2019.

Oasis is expected to have minimal impact on Paychex’s bottom line in fiscal 2019 (excluding one-time acquisition-related costs). Inclusive of one-time acquisition costs, the purchase is expected to be nearly 3 cents dilutive to fiscal 2019 earnings per share.

The acquisition of Oasis is likely to help Paychex strengthen its total service revenues, which include Management Solutions revenues and PEO and insurance services revenues.

Zacks Rank & Stocks to Consider

Paychex currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some other better-ranked stocks in the broader Zacks Business Services sector are Interpublic (IPG - Free Report) , Automatic Data Processing (ADP - Free Report) and Navigant Consulting , each carrying a Zacks Rank #2 (Buy). Long-term expected EPS (three to five years) growth rates for Interpublic, Automatic Data Processing and Navigant are 7.4%, 12.5% and 13.5%, respectively.

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