Pitney Bowes Inc. (NYSE: PBI), a global technology company that provides commerce solutions in the areas of eCommerce, shipping, mailing, data, and financial services, today announced that it has entered into a definitive agreement to sell its Software Solutions business to Syncsort for $700 million in cash. The transaction is expected to close before the end of the calendar year, pending regulatory approvals and other customary closing conditions.
“Our software and data business has made great progress over the last few years achieving two consecutive years of growth and I am very confident of the prospects for this business going forward,” said Marc B. Lautenbach, President, and CEO. “We have always said, however, if a business was worth more to someone else than to us, we would consider a sale. The sale of our Software Solutions business to Syncsort confirms that philosophy. Our software and data business, together with Syncsort, provides an instant scale that creates value for our clients, partners, and the Pitney Bowes Software Solutions team.
Lautenbach continued: “While it is never easy to make this kind of decisions, I am convinced that this is the right thing to do for the long term. Pitney Bowes will move forward as a streamlined, global technology company focused on shipping, mailing and related financial services that operate in markets where we have a true competitive advantage.”
Following the conclusion of the Company’s evaluation of strategic alternatives in 2018, Pitney Bowes’ senior management, along with the Pitney Bowes Board of Directors, committed to consider other options to unlock value for shareholders. Since then, the Company has divested its Document Messaging Technologies (DMT) Production Mail and supporting software business; sold its direct operations within the Global SMB business in six smaller European countries; paid down debt; altered the return of cash to shareholders from a dividend to a share buyback; launched Wheeler Financial Services; and continued to invest in its core business with new products in Global SMB and new capabilities in Commerce Services, including the expansion of its domestic delivery network.
Use of Net Proceeds
The Company plans to use the majority of the net proceeds from the sale to pay down near-term debt maturities.
“We have several tranches of debt that are maturing over the next two years and we will use the majority of the net proceeds from this transaction to pay down that debt and we will refinance the remainder,” said Stan Sutula, Executive Vice President and CFO. “Further, we have well-established relationships with our bank group and are structuring a proactive refinancing plan that reflects a diversity of funding sources and will leverage the capital markets, as appropriate.”
Beginning with the third quarter, Pitney Bowes Software Solutions will be recorded as discontinued operations and prior periods will be recast to exclude Software Solution’s results from continuing operations. The recast financial statements will be posted to the Company’s Investor Relations website by the end of September.
For 2019, the Company is updating its annual revenue growth rate, adjusted EPS and free cash flow guidance as follows:
- Revenue to be in the range of 1 to 2 percent growth on a constant currency basis when compared to the recast 2018 revenue
- Adjusted EPS to be in the range of $0.65 to $0.75
- Free cash flow to be in the range of $175 to $205 million
This updated annual adjusted EPS guidance reflects the impact of the sale of Software Solutions as well as the impact from the higher level of tariffs, which were not assumed in the Company’s original guidance. These impacts are expected to be partially offset by a deferred tax asset valuation allowance reversal, which based on current results and future income projections is currently expected to be recorded in the third quarter, and as a result the Company expects third quarter attainment to the full year for adjusted EPS to be in the range of 32 to 34 percent.
The guidance reflects the shift of the business to the fourth quarter as shipping continues to be a larger part of the portfolio. As a result, the Company expects its fourth-quarter attainment to the full year for revenue to be in the range of 26 to 28 percent.
As a result of this transaction, the Company will further streamline its operations and reduce spend. The dilution from the divestiture is expected to be earnings neutral in the 12 months following the closing of this transaction as a result of the lower interest expense related to the paydown of debt and overall spending reductions.
Prior to the close, Pitney Bowes will continue to work closely with its software clients, partners, and systems integrators, while partnering with Syncsort to ensure a smooth transition. This transaction is subject to regulatory approvals and other customary closing conditions.
Goldman Sachs & Co LLC is serving as financial advisor and Cravath, Swaine & Moore is serving as legal advisor to Pitney Bowes.