Alight Sells Businesses for $1.2B, Boosts Earnings

Alight, Inc. (NYSE: ALIT) has recently announced a significant agreement to sell its professional services segment and payroll & HCM outsourcing businesses within the employer solutions segment to an affiliate of H.I.G. Capital for up to $1.2 billion. This move is part of the company's plan to accelerate its transformation towards a simplified and focused platform company for employee wellbeing and benefits.

Following the transaction, Alight's recurring revenue is expected to increase from 84% to over 90%, and the margin profile is anticipated to improve by nearly 300 basis points. The company has also raised its mid-term adjusted EBITDA margin guidance to 28%. Alight's focus over the last four years around standardization, automation, and cloud migration has significantly enhanced the margin profile of the remaining core business, resulting in nearly 300 basis points of adjusted EBITDA margin expansion upon deal closing.

The sale represents a transaction value of up to $1.2 billion, comprising $1 billion in cash and up to $200 million in seller notes, of which $150 million is contingent upon the payroll & professional services business’ 2025 financial performance. The company expects to use the net after-tax cash proceeds to reduce debt, return capital, and for general corporate purposes, including reinvestment into growth opportunities.

Moreover, Alight has increased its stock repurchase program by $200 million, bringing the total amount authorized for repurchase to $248 million. This decision reflects the company's confidence in its financial position and its commitment to delivering long-term value to shareholders.

The transaction is expected to close by mid-year 2024, subject to customary closing conditions, including regulatory approvals. After closing, Alight expects to update its full-year 2024 financial guidance.

As a result of these announcements, the company's shares have moved 9.7% on the market, and are now trading at a price of $9.7. If you want to know more, read the company's complete 8-K report here.

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