Randstad (31,51 EUR, 1,61%) announced that it signed an agreement with USG People to acquire USG People’s general staffing activities in Spain, Italy, Poland, Switzerland, Luxembourg and Austria. This implies an investment of € 20m while it adds revenue of € 434m. Within these countries, except for Austria, both businesses have a comparable offering and geographic coverage, which creates a strategic opportunity. This transaction will improve Randstad’s density of the branch network, which is important for reaching our strategic targets. Randstad will increase its market position. They will become the number 1 player in Spain, Poland and Luxembourg, while we increase our market position in Italy and Switzerland. Randstad also enters the Austrian market through the transaction. The deal offers a significant opportunity for value creation and will be immediately accretive to Randstad’s earnings per share.
The acquired activities include over 800 corporate employees and 189 outlets. Randstad’s revenue in the countries in scope amounts to € 1.2bn (FY 2012). The consideration to be paid amounts to € 20m and does not exceed the working capital of the activities in scope. As such, the transaction is considered not material for Randstad’s financial position. Randstad will benefit from significant cross-selling opportunities, such as the introduction of inhouse services and sharing of best practices and processes. Our focus will be on capturing profitable growth, client profitability, and optimizing delivery models. Combined with further efficiency improvements and office optimizations, it is expected that these activities will soon start contributing to Randstad’s strategic targets.
Randstad expects to close the transaction in June 2013. Randstad will finance the transaction by using its existing credit facilities.
Our view and conclusion:
We believe this is an attractive deal for Randstad as they can add scale in their markets at a low price. Integration should progress smoothly after the successful integration of Vedior. The group didn’t provide guidance on the potential synergies. More details on this are expected when they finalise the transaction in June.
We expect Randstad to move the current REBITA margins in the acquired businesses to local Randstad averages. This means that the acquired REBITA of € 4.2m in FY12 will be upped at least € 10m after the integration and not yet taking into account the impactof the introduction of Inhouse and cross-selling opportunities.