Sage Group is selling its payroll solutions business for an apparent loss, four years after buying the company.
Accel-KKR is buying the company, formerly known as PayChoice, for about 78 million pounds ($94.4 million). Terms of the deal call for Accel-KKR to pay 73 million pounds cash on completion of the deal, while 5 million pounds represent contingent consideration.
Sage Payroll Solutions, of Mount Laurel, New Jersey, provides cloud-based payroll software for companies. The unit counts 44,000 small-to-midsized companies as customers. Sage acquired PayChoice in 2014.
Sage is selling PayChoice because it’s no longer part of its core. The U.K. software company said in November 2018 it was putting PayChoice up for sale because it’s focusing on subscription software that is in or has “a pathway to Sage Business Cloud,” the statement said.
Sage bought Paychoice for $157.8 million in cash, more than the $94.4 million it will receive with the sale to Accel-KKR. When the deal closes, Sage said it would report a statutory profit on disposing the business of about 23 million pounds.
Asked about the loss, Victoria Borges, a Sage spokeswoman, said the company is focused on driving growth within its cloud native products, specifically those with a clear path to Sage Business Cloud.
“The US Payroll Outsourcing team has a strong brand and market position, but does not have a clear route to the Sage Business Cloud. So we have chosen a different route to create value for our shareholders in line with our strategy,” Borges wrote. “We wish the team well under their new parent.”
Sage in 2017 also sold its North American payments business to GTCR for $260 million. Sage Payment Solutions changed its name to Paya in 2018.
The deal is the latest for Accel-KKR, which focuses on mid-market software and technology-enabled-services firms. The very acquisitive Accel-KKR said Feb. 6 that it was backing the merger of hospitality technology providers Travel Tripper and Pegasus.
Accel-KKR, Menlo Park, California, also backed Vistex in January, while its portfolio company Seequent acquired Geosoft in December.
Raymond James provided financial advice to PayChoice in its sale to Accel-KKR.
Accel-KKR could not be reached for comment.
Action Item: For more information on Accel-KKR see their website here.