SPIN OFF REPORT: Cannae Holdings Inc. (CNNE) completes carve out of Ceridian HCM Holding (CDAY)
On April 26th, 2018,Cannae Holdings Inc. (NYSE:CNNE) announced final pricing of the carve-out of its minority stake in Ceridian HCM Holding Inc (NYSE:CDAY) CNNE will retain ~27.9% interest in Ceridian. The IPO is priced at $22 per share and is expected to be completed on April 30th, 2018. We view the IPO mainly as a move to delever Ceridian's balance sheet.
CNNE provides a vehicle to prudently monetize existing investments and make new non-core investments. Post-transaction, CNNE boasts a strong balance sheet with net cash of ~215.4 million, which should suppor the company's inorganic growth plans. CNNE chairman Bill Foley and his management team have a long term track record of creating value for shareholders in a variety of industries.
CDAY is transitioning to a fast growing cloud business led by Dayforce, its flagship HCM platform. The launch of new features, global expansion plans, and migration of business customers to Dayforce should all bolster sales growth. High level fo cloud annualized recurring revenue (~52% of overall size) provides visibility and predictability. Looking into 2018, the company noted strong momentum with 1Q18 cloud revenues likely to grow by ~35% - 38% YOY. We believe the positives are priced in and see limitd upside in the near term.
In our view, both CNNE and CDAY are fairly valued.
Cannae is a holding company engaged in managing and operating a group of companies and investments. The company's segments are: Restaurant Group, which consists of the operations of American Blue Ribbon Holdings, LLC and 99 Restaurants Holdings, LLC; Ceridian, which consists of the operations of the company's subsidiary, Ceridian HCM Holding, Inc., a global human capital management software company; T-System, which consists of the operations of the company's subsidiary, T-System Holdings, LLC, a provider of clinical documentation and coding solutions; and Corporate and Other, which consists of the company's share in the operations of controlled and uncontrolled portfolio companies.
Ceridian HCM Holding is a holding company. Through its subsidiaries, the company is a human capital management (HCM) software company. Dayforce, the company's cloud HCM platform, provides human resources (HR), payroll, benefits, workforce management, and talent management functionality. In addition to Dayforce, the company sells Powerpay, a cloud HR and payroll solution for the Canadian small business market, through both direct sales and established partner channels. The company also continues to support customers using its Bureau solutions, which it generally stopped selling to new customers. The company invests in maintenance and necessary updates to support its Bureau customers and continues to migrate them to Dayforce.
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