By Akanksha Rana and Carl O'Donnell
Feb 4 (Reuters) - Ultimate Software Group Inc ULTI.O , a cloud-based human resources applications developer, said on Monday it agreed to be bought by an investor group led by private equity firm Hellman & Friedman for about $11 billion.
The $331.50 per share all-cash offer is at a premium of 19 percent to the HR software provider's closing share price on Friday. Shares of Ultimate Software surged 19.5 percent to $332.01, as investors speculated about the prospects of a rival bidder emerging. investor group also includes Blackstone (NYSE:BX) Group LP BX.N , GIC Pte Ltd, Canada Pension Plan Investment Board (CPPIB) and JMI Equity.
The deal will be heavily financed with equity, and will use a relatively small amount of debt compared with typical leveraged buyouts, people familiar with the matter said. Debt financing for the deal was provided by investment banks Credit Suisse Group AG CSGN.S and Nomura Co Ltd 9716.T , the people said.
Ultimate Software's earnings before interest taxes and depreciation and amortization is about $300 million, the people added.
Credit Suisse declined to comment. Nomura could not be reached for comment.
HR software makers are benefiting from the growing tendency among enterprises to shift to cloud-based applications in a move to manage their payroll and human resources.
Ultimate Software competes with its rivals, including Workday Inc WDAY.O , Automatic Data Processing Inc ADP.O and Oracle Corp (NYSE:ORCL) ORCL.N , to sell software to companies to help manage their employees.
The size of the industry, known as cloud human capital management, is expected to touch $22.17 billion in 2023 from $13 billion in 2016, according to a report by Allied Market Research.
"We've done a lot of work looking at the space in the last year and this is an exceptional company with a strong culture," Martin Brand, senior managing director at Blackstone, said in an interview.
While there have been few big deals among the HR software makers in the last decade, Workday last year bought smaller Adaptive Insights Inc for about $1.55 billion a week before it was slated to go public.
Hellman & Friedman had earlier taken human resources management software maker Kronos Inc private in 2007 for $1.8 billion. Blackstone also owns benefits and HR platform Alight Solutions LLC.
Ultimate Software, which generated more than $1.1 billion in 2018 revenue, expects the deal to close in mid-2019. The company can also consider alternative offers in a 50-day "go-shop" period, where it will reach out to a number of potential buyers, including both private equity firms and companies in the sector.
Upon completion of the deal, privately held Ultimate Software will be managed by its existing management led by Chief Executive Scott Scherr.
Goldman Sachs & Co (NYSE:GS) LLC advised Ultimate Software, while Qatalyst Partners advised the investor group.