Payroll and benefits outsourcing concern Automatic Data Processing Inc. will spin off its massive brokerage-services unit, an arm that observers project would have a market cap of more than $3 billion.

ADP said that as a result of the spin off -- which should be completed by the end of fiscal 2007 -- it expects to receive a distribution of $500 million to $700 million from the business in the form of a tax-free dividend.

ADP said that the decision to spin off the unit came following a yearlong strategic review. In that process the company mulled an initial public offering, as well as an outright sale of the business.

Although more well-known for its signature payroll unit, ADP's brokerage-services business both processes and clears trades of securities, along with handling the distribution of related materials such as proxy reports.

ADP's brokerage-services arm generated roughly $2 billion in revenue for its most recent fiscal year, accounting for about 20 percent of the company's overall revenue figure.

Previously on WebCPA:

ADP, First Data Partner for Payroll Outsourcing (June 20, 2006)ADP Enters Accounts Payable Market (Jan. 25, 2006)

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