Hewitt and Exult to Combine to Create Global Leader in HR Outsourcing.LINCOLNSHIRE, Ill. & IRVINE, Calif. -- Hewitt Associates Some of the information in this article may not be verified by . It should be checked for inaccuracies and modified to cite reliable sources. Hewitt Associates , Inc. (NYSE NYSE See: New York Stock Exchange :HEW), a global human resources The fancy word for "people." The human resources department within an organization, years ago known as the "personnel department," manages the administrative aspects of the employees. (HR) outsourcing and consulting firm Noun 1. consulting firm - a firm of experts providing professional advice to an organization for a fee consulting company business firm, firm, house - the members of a business organization that owns or operates one or more establishments; "he worked for a , and Exult, Inc. (Nasdaq:EXLT), a leading provider of HR business process outsourcing Business process outsourcing (BPO) is the contracting of a specific business task, such as payroll, to a third-party service provider. Usually, BPO is implemented as a cost-saving measure for tasks that a company requires but does not depend upon to maintain its position in , today announced their boards of directors approved a definitive agreement for Hewitt and Exult to merge. Under the terms of the agreement, Exult stockholders will receive 0.20 shares of Hewitt Class A common stock, on a tax-free basis, for each Exult share (approximately $6.30 per Exult share based on yesterday's closing price). Following the merger, Hewitt will be the global leader in the rapidly growing HR business process outsourcing (BPO BPO Business Process Outsourcing BPO Benevolent & Protective Order (of Elks of the USA) BPO Benzoyl Peroxide BPO Business Process Optimization BPO Broker Price Opinions BPO Buffalo Philharmonic Orchestra ) industry with enhanced growth prospects. It will be the only organization capable of offering total HR BPO services -- benefits, payroll, HR information systems, recruiting, learning and other HR services -- on an integrated basis with complete HR consulting expertise. Based on current estimates, combined revenues will approach $3.0 billion in fiscal 2005. The transaction is expected to increase revenue growth rates Growth Rates The compounded annualized rate of growth of a company's revenues, earnings, dividends, or other figures. Notes: Remember, historically high growth rates don't always mean a high rate of growth looking into the future. , enhance future profitability, and create long-term value for clients and stockholders of Hewitt and Exult. "This is a truly outstanding combination," said Dale Gifford, Hewitt Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. . "The addition of Exult's comprehensive service mix, Six Sigma Not to be confused with Sigma 6. Six Sigma is a set of practices originally developed by Motorola to systematically improve processes by eliminating defects.[1] A defect is defined as nonconformity of a product or service to its specifications. expertise and delivery capabilities to Hewitt's integrated HR outsourcing and consulting solutions and operating capabilities Noun 1. operating capability - the capability of a technological system to perform as intended performance capability capability, capableness - the quality of being capable -- physically or intellectually or legally; "he worked to the limits of his , will create a true leader with the most flexible and broad HR solution. We'll be a one-stop shop One-Stop Shop A company or a location that offers a multitude of services to a client or a customer. The idea is to provide convenient and efficient service and also to create the opportunity for the company to sell more products to clients and customers. for all HR services, and can provide this on an integrated basis through a leverageable operating model Operating Model is a term that is used in many contexts. In essence an operating model describes how an organization operates across both business and technology domains. The Operating Model describes what is important for the organization. . We are very excited about the possibilities this combination creates for our clients and for both companies," he continued. Exult founder and CEO Jim Madden mad·den v. mad·dened, mad·den·ing, mad·dens v.tr. 1. To make angry; irritate. 2. To drive insane. v.intr. To become infuriated. , who will focus on integration and transition, as well as business development efforts for the combined company's broader HR BPO business, said, "Over the last six years, Exult has pioneered the development of HR-led business process outsourcing. Combining Exult with Hewitt, renowned as a premier HR outsourcing and consulting firm, creates a wealth of exciting growth opportunities, as well as operational and client acquisition synergies. This strategic merger is a testament to the fast-growing market for HR BPO and reinforces the importance of HR domain knowledge in this marketplace."
Strategic Benefits of the Combination
The combination of Hewitt and Exult has four key benefits:
-- A leadership position in a key growth segment -- HR BPO.
Independent industry analysts estimate that the broader HR
outsourcing marketplace is the fastest growing area within
BPO. The merged organization will establish a leading
position in the HR BPO business serving more than 18
million participants from more than 300 companies with
benefits outsourcing; more than 600,000 employees from 21
client organizations with broader HR outsourcing,
including benefits, payroll and HR administration; and
more than 2,300 companies with HR consulting.
-- The most comprehensive, flexible solution in the marketplace.
This combination uniquely positions the new organization to
offer clients the entire spectrum of outsourcing and
consulting solutions, with unmatched flexibility to craft a
tailored client solution. The merger expands the
organization's global presence and brings together many
additional service capabilities, including recruiting and
staffing, global mobility, time and attendance, learning and
development, and accounts payable and expense administration
solutions. In addition, Exult brings process rationalization,
scoping expertise and vendor management capabilities. These
capabilities, combined with Hewitt's full suite of HR
consulting services, make Hewitt the only organization capable
of offering a flexible end-to-end solution, from strategy and
design to administration and outsourcing.
-- Unmatched execution, excellence and experience.
The combined organization will have deep-rooted experience in
implementing and providing outsourcing services to hundreds of
large, complex companies on a global basis, resulting in
increased operational functionality and efficiency. The
combined company will have a greater number of large employer
HR outsourcing clients than any other firm, and deeper HR
content and process knowledge.
-- Scale and increased financial strength.
The combined company will have unmatched scale in HR BPO, with
a unique business model, and enhanced growth prospects.
The combined infrastructure will more efficiently support
future growth in HR BPO.
Financial Outlook On a stand-alone basis for fiscal 2004, Hewitt continues to expect net revenues to increase 10%-11% from fiscal 2003 revenues of $2.0 billion. The revenue growth forecast continues to be approximately 10%-12% growth in Outsourcing, from $1.2 billion in fiscal 2003, and 4%-8% growth in Consulting, from $734 million in fiscal 2003. Hewitt continues to expect core earnings per share in fiscal 2004 in the low $1.30s. Cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses after capital expenditures but before acquisitions for fiscal 2004 is expected to be between $160 million and $175 million. For fiscal 2005, before the effects of this acquisition, Hewitt expects total net revenue growth of 6%-9%. The revenue growth forecast comprises approximately 7%-10% growth in Outsourcing and 4%-8% growth in Consulting. On this basis, the company expects fiscal 2005 core earnings per share growth of approximately 15% and cash flow from operations after capital expenditures but before acquisitions between $175 million and $190 million. With the addition of Exult, Hewitt expects revenue to increase by approximately 35%, including more than 50% growth in Outsourcing for fiscal 2005, relative to Hewitt's expected fiscal 2004 revenue. The company expects to generate operating synergies of approximately $25 million in fiscal 2005, reaching approximately $30 million annually beginning in fiscal 2006. The company currently estimates the amortization of intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. to initially be slightly more than $20 million annually and one-time integration and retention costs to be approximately $20 million in fiscal 2005 and approximately $10 million in fiscal 2006, with no meaningful impact thereafter. The transaction is expected to be approximately 2% dilutive to core earnings per share in fiscal 2005 and neutral in 2006, after excluding the amortization of intangible assets and one-time integration and retention costs. Dilution to reported earnings per share, which includes expenses related to the amortization of intangible assets and one-time integration and retention costs, is expected to be approximately 15% in fiscal 2005 and approximately 10% in fiscal 2006. The company presents core earnings, a non-GAAP financial measure, to provide information on a basis that excludes pre-tax charges of $39 million for fiscal 2003, an estimated $18-$20 million in each of fiscal 2004 and 2005, and approximately $13-$15 million in fiscal 2006, related to the amortization of the one-time, IPO-related grant of restricted stock to employees. Core earnings per share also include the shares issued in the one-time, IPO-related grant as if they had been outstanding from the beginning of fiscal 2002. Leadership and Integration Hewitt's board of directors will increase from 10 to 12 with the addition of two of Exult's outside directors, including Steve Denning, managing partner of General Atlantic Partners LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control , a leading global direct investment firm, and a founding investor in Exult. Exult's operations will be merged into Hewitt's existing HR outsourcing business, which will continue to be led by Hewitt's outsourcing leader, Bryan Doyle. Kevin Campbell Kevin Campbell is the name of:
Transaction Terms and Additional Information The transaction is subject to stockholder and regulatory approval, and is currently expected to close around the end of Hewitt's fiscal year, September 30, 2004. Exult's largest shareholder, General Atlantic Partners LLC, and certain Exult executives have entered into stockholder agreements in which they have agreed to vote their shares in favor of the transaction. As part of the transaction Hewitt acquires Exult's net operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. (NOL NOL - Never Offline ) carry forward (currently estimated at $160 million) which is expected to reduce Hewitt's cash taxes in the future. Approximately $40 million related to settlement outlays Outlays Payments on obligations in the form of cash, checks, the issuance of bonds or notes, or the maturing of interest coupons. for Exult's current outstanding employee stock options and incentive plans is expected to be incurred by Exult at or prior to closing. Hewitt's financial advisor on the transaction is Goldman, Sachs & Co., and its legal advisor is Jones Day. Exult's financial advisor on the transaction is Morgan Stanley  To comply with Wikipedia's , the introduction of this article needs a complete rewrite. & Co.
Incorporated, and its legal advisor is Gibson, Dunn & Crutcher.
Share Repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. and Secondary Offering Hewitt also announced that its board of directors has authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: the company to repurchase up to an aggregate amount of $150 million of Hewitt's Class A, B and C common shares, depending on market conditions and other customary factors, given the continued strong cash position and expected future cash flows Expected future cash flows Projected future cash flows associated with an asset. of the combined companies. Expectations described in the financial outlook section exclude the effect of any share repurchase. As a result of this merger, Hewitt has postponed its previously announced secondary offering for current and former employees, which was expected to be completed in fiscal 2004. Conference Call At 7:15 a.m. (CDT CDT abbr. Central Daylight Time CDT Central Daylight Time CDT n abbr (US) (= Central Daylight Time) → hora de verano del centro; (BRIT ) today, the companies will conduct a joint conference call and Webcast with investors to discuss the transaction. To participate in the call, please dial (888) 428-4478. Outside of the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , dial (651) 224-7558. The live presentation also is accessible through the Investor Relations Investor relations The process by which the corporation communicates with its investors. section of Hewitt's and Exult's Web sites at www.Hewitt.com and www.Exult.com, respectively. The Webcast will be archived on the site for approximately one month. During the call, management will discuss certain non-GAAP financial measures. Refer to Hewitt's fiscal second quarter press release dated May 4, 2004, for a full reconciliation of core earnings to GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). earnings. The press release is posted on the Investor Relations section of www.Hewitt.com. About Hewitt Hewitt (www.Hewitt.com) is a leading global human resources outsourcing and consulting firm. It provides services from offices in 38 countries. About Exult Exult (www.Exult.com) is a leading provider in the HR-led BPO market. Meeting an increasingly critical need for Global 500 companies, Exult provides comprehensive Human Resources outsourcing solutions and expertise in high volume business processes, including related Finance and Accounting and Procurement The fancy word for "purchasing." The procurement department within an organization manages all the major purchases. offerings. This release and related investor presentation materials contain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Such statements include, but are not limited to, statements about the expected results of operations and benefits of the merger between Hewitt and Exult, including future financial and operating results, Hewitt's plans, objectives, expectations and intentions and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of Hewitt's and Exult's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: the ability to obtain governmental approvals of the merger on the proposed terms and schedule; the failure of Hewitt and Exult stockholders to approve the merger; the risk that the businesses will not be integrated successfully; the risk that the cost savings and any revenue synergies from the merger may not be fully realized or may take longer to realize than expected; disruption from the merger making it more difficult to maintain relationships with clients, employees or suppliers; increased competition and its effect on pricing, spending, third-party relationships and revenues; the risk of new and changing regulation in the U.S. and internationally. Additional factors that could cause Hewitt's and Exult's results to differ materially from those described in the forward-looking statements can be found in the 2003 Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. of Hewitt and the Form S-3 of Exult filed with the Securities and Exchange Commission and available at the Securities and Exchange Commission's internet site (http://www.sec.gov). Hewitt intends to file a registration statement containing a joint proxy statement/prospectus and other relevant documents concerning the proposed merger with the Securities and Exchange Commission (the "SEC"). WE URGE INVESTORS IN HEWITT AND EXULT TO CAREFULLY READ THESE DOCUMENTS WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT HEWITT, EXULT AND THE PROPOSED TRANSACTION. You will be able to obtain documents filed with the SEC by Hewitt and Exult free of charge at the SEC's website, www.sec.gov. You may obtain documents filed with the SEC by Hewitt free of charge if you request them in writing from Investor Relations, Hewitt Associates, Inc., 100 Half Day Rd., Lincolnshire, IL 60069, or by telephone at (847) 295-5000. You may also obtain documents filed with the SEC by Exult free of charge if you request them in writing from Exult Investor Relations, 121 Innovation Drive, Irvine, CA 92612 or by telephone at (949) 856-8841. This communication is not a solicitation solicitation In criminal law, the act of asking, inducing, or directing someone to commit a crime. The person soliciting another becomes an accomplice to the crime. The term also refers to the act of obtaining bribes, as well as to the crime of a prostitute who offers sexual of a proxy from any security holder of Hewitt or Exult. Hewitt and Exult, and their respective executive officers and directors may be deemed to be participants in the solicitation of proxies from Hewitt and Exult security holders in favor of the proposed transaction. Information regarding the security ownership and other interests of Hewitt's and Exult's executive officers and directors will be included in the joint proxy statement/prospectus. |
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