Dutch staffing firm Randstad to buy rival Vedior

AMSTERDAM (Reuters) - Dutch jobs firm Randstad (RAND.AS) is buying rival Vedior VDOR.AS in a cash-and-shares deal worth 3.3 billion euros ($4.87 billion) to create the world's second-largest staffing company, it said on Monday.

The proposed offer values Vedior at 19.09 euros per share, a 55 percent premium over Vedior's share price last Thursday, one day before the companies said they were in talks.

The offer is expected to comprise 9.5 euros in cash and 0.32759 Randstad shares for each Vedior share.

"We do see the positive drivers for the acquisition since it improves Randstad's position in professional staffing and its geographical presence ... Moreover, scale remains an important competitive factor," SNS Securities analysts said in a note.

Based on the proposed offer and at Thursday's stock price, Randstad said in its statement that its offer was worth 3.5 billion euros, or 20.19 euros per share.

But shares in Randstad, which plans to issue 57 million new shares for the deal, fell 9.7 percent on Monday by 1200 GMT, reducing the value of its offer to 3.3 billion euros.

Vedior stock was trading up 9 percent at 18.52 euros, just short of Randstad's offer.

Shares in staffing firm USG People (USGP.AS) were up 3 percent to 19.30 euros, and Brunel (BRUN.AS) was down 1 percent.

Fears of a U.S. downturn and weaker demand for flexible labor have weighed on shares of staffing firms this year.

Revenue in the Dutch temporary staffing market rose 2 percent in the four weeks to November 4 from a year earlier, the Dutch association of temporary work agencies ABU said last week, marking its slowest growth rate since early 2004.

But Randstad Chief Executive Ben Noteboom said he was not worried about the staffing market.

"We are not negative about market developments," Noteboom told reporters.

Randstad said in a statement it expected 100 million euros in annual cost and tax synergy benefits. The new company would be the world's second-largest jobs firm after Switzerland's Adecco (ADEN.VX), with annual revenues of 17.3 billion euros.

The proposed takeover will contribute to earnings per share from the outset, excluding one-off costs of 60 million euros, Noteboom told reporters. He said he did not expect any antitrust issues to complicate the deal.

RIGHT PRICE

The board and management of Vedior support Randstad's offer, which is expected to be formalized in early 2008, Randstad said.

Asked whether Randstad was paying too much for Vedior, Noteboom said: "We see it as the right price."

Randstad said it is paying 16.1 times earnings per share for the 12 months ended September 30 for Vedior. For calendar 2007, the DJ Stoxx European Industrial Goods and Services index .SXNP is trading at 15.3 times earnings.

"This bid price for Randstad is roughly the maximum they can bid without diluting their own valuation," Petercam analyst Thijs Berkelder said in a client note.

"In the event of a counter bid Randstad will not be able to lift its bid price to higher levels."

Vedior CEO Tex Gunning told reporters that he did not expect a counterbid for the company, but if approached, would look at any offer "in line with fiduciary duties".

Before the companies disclosed their takeover talks, Vedior shares had risen on speculation that it could be broken up or taken over by Adecco.

Dutch market regulator AFM said on Friday it would investigate possible insider trading or market manipulation in Vedior shares after the stock jump, and Noteboom and Gunning said they were cooperating with the regulator.

Vedior, with 40 percent of its sales in France and 9 percent in the United States, focuses on the specialist and permanent placing markets.

Last month, Randstad, which gets just over a third of turnover in the Dutch market and focuses more on the blue-collar worker segment, had forecast slowing growth ahead.

ABN AMRO and Goldman Sachs are advising Randstad on the deal, while ING and Merrill Lynch are Vedior's advisers.

(Additional reporting by Foo Yun Chee and Niclas Mika; Editing by Louise Ireland)