Ceridian, under pressure from an activist hedge fund, agreed to be bought by private equity firm Thomas H. Lee Partners and insurance company Fidelity National Financial for $5.3 billion, the business services company said on Wednesday.
Ceridian had been battling with Pershing Square Capital Management, a hedge fund and major shareholder, which wanted the company to spin off its Comdata division and replace its board.
Pershing told Ceridian in a letter earlier this year that the company had "underperformed and failed to achieve its business potential for more than a decade."
Ceridian said in a statement on Wednesday it had conducted a "comprehensive review process" in which it evaluated a "number of strategic alternatives available" including options related to Comdata.
The all-cash $36-a-share deal is a premium of about 17% to Ceridian's closing share price on Feb. 12, the last trading day before it said it retained Greenhill & Co. as financial advisers to explore strategic alternatives.
It said the previous month it had hired a financial adviser to help review its business, including a possible Comdata spin-off.
Minneapolis-based Ceridian's main human resources outsourcing division offers payroll, benefits administration, and other services to companies. Comdata offers payment processing and is an issuer of credit cards and debit cards.
Jacksonville, Florida-based Fidelity National Financial provides title insurance. Title insurance, commonly offered in the United States, gives buyers and lenders protection against defects in a property that later may come to light -- such as a third party having a prior ownership claim on that property.
Ceridian's shares closed at $34.19 on Wednesday. The deal is subject to shareholder and regulatory approval.
Sources previously told Reuters that Pershing founder William Ackman felt he and other shareholders stood to make significantly more money should Ceridian be split up rather than sold.
In addition to pressure from Pershing, activist investment firm Relational Investors had also been agitating for changes at Ceridian.
Relational founder Ralph Whitworth in February wrote to Ceridian and said investors were not satisfied with its performance. But in an April interview, Whitworth said Relational had sold all its Ceridian shares, saying he had "bigger fish to fry."
Pershing could not be immediately reached for comment on Wednesday's deal.