Randstad offers $771 million for SFN Group in US

AP News
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Posted: Jul 21, 2011 3:46 AM
Randstad offers $771 million for SFN Group in US

Randstad Holding NV, the world's second-largest staffing company, says it is offering $14 (euro9.34) per share or $771 million in cash, for U.S. staffing company SFN Group, in a deal backed by SFN's management.

The offer, conditional to regulatory approval and shareholders tendering more than 50 percent of shares to its offer, represents a 52 percent premium over SFN's closing price Wednesday of $9.22.

Randstad said the deal would make it the third-largest human resources firm in North America, with combined sales there of $4.6 billion over the past year ended March 31.

"By sharing best practices and leveraging the cross-selling potential, we will be well-positioned to offer our clients and candidates an unrivaled portfolio of services," said Randstad CEO Ben Noteboom in a statement.

Randstad said SFN would boost its position in providing professional staffing in finance and accounting, as well as administrative services. The deal will add to Randstad's per share earnings in the first year, the company said.

It cited annual tax savings of $10 million and cost savings of $30 million by combining companies, including via "office optimizations," but did not mention any potential layoffs.

SFN Group chief executive Roy Krause said the deal would "provide growth opportunities for our staff associates."

Randstad is due to publish second quarter earnings on July 28, but said Thursday it had 11 percent revenue growth per working day in the quarter from a year ago company-wide and its North American arm showed 14 percent growth.

Shares rose 2.2 percent to euro30.55 in early Amsterdam trading.

SNS Securities analyst Gert Steens said in a note to investors "the acquisition does not look overly cheap." But even with the premium paid, SFN's business is not as highly valued by markets as Randstad's, he said, and it makes sense for the two to combine operations in the "fragmented" U.S. staffing market.

Steens, who rates shares a "buy," noted that Randstad's pre-anounced second quarter sales appeared slightly below estimates.

For the first quarter, Randstad had reported net profit of euro136.6 million, with sales up 22 percent to euro3.89 billion.

The companies did not set a date for the formal Randstad offer to commence, but said they expected the deal to close by the end of September.

Randstad did not give an indication of its post-deal debt, but at the end of the first quarter, it had net debt of euro747 million. It said it has agreed a new credit line with seven banks that begins in 2013 and will run through 2016, with maximum borrowing of around euro1 billion.

Randstad's last major deal was its $5 billion buyout of competitor Vedior NV in 2007, which put it past Manpower Inc. as the number two global staffing company in terms of size, behind only Switzerland's Adecco SA.