ADP Dealer Services, a dealer software giant, is poised to become an independent public company, according to a statement today by parent company ADP.
ADP Inc.'s board of directors has approved the spinoff, the statement said.
ADP Dealer Services and arch-rival Reynolds & Reynolds together provide about 80 percent of the dealer management systems in the United States, which is the critical operating software of a dealership.
Annual global revenue at ADP Dealer Services is nearly $2 billion. The company has not yet filed with financial regulators for an initial public offering. Reynolds is privately owned.
The announcement is the latest in a series of merger and capital-raising activities in the auto retailing sector. Last week TrueCar, an online car-buying service, announced with it would go public in a $125 million initial public offering.
And publicly traded Dealertrack Technologies, a leader in providing dealer credit and financial software, paid about $1 billion in cash and stock to purchase digital-marketing giant Dealer.com.
The spinoff will allow ADP Dealer Services to focus solely on its business and continue its growth, said Carlos Rodriguez, CEO of parent ADP. The main business of ADP, whose annual revenues last year were $11 billion, is handling human-resource chores for major corporations.
$700 million from spinoff
The subsidiary, he said in a release, has “good profitability and strong cash flows.” The company provides a full line of dealer software and is a leader in digital-marketing services for dealerships through its Cobalt unit.
Steve Anenen, 61, group president of ADP Dealer Services, is expected to become CEO of the new public company, an ADP spokeswoman said today. Al Nietzel, 52, an ADP Dealer Services executive, is set to become CFO, she said.
In the announcement, ADP said it expects to receive at least $700 million tax-free from the spinoff to return to ADP shareholders through the repurchase of ADP shares.