Can USG People ward off opportunistic buyers?

By Foo Yun Chee

AMSTERDAM (Reuters) - Dutch staffing company USG People's (USGP.AS) proposed strategy to ward off unwanted buyers with a poison pill is risky but could work.

Fearful that an opportunistic buyer may scoop up its shares, which have halved in value since the start of the year, USG People, among the top six jobs company in the world, wants to set up a foundation charged with protecting the company, to which it can issue preference shares.

The foundation could therefore gain enough voting power to stall a hostile bid.

This kind of practice is not unusual in the Netherlands and Dutch companies have used it twice in recent years to keep activist investors at bay, but both cases went to court, highlighting the legal risks involved in such a move.

USG says there is no immediate reason for using preference shares but stresses the measure can strengthen its negotiating power in the event of an unwanted build-up of a controlling stake by a shareholder and the absence of an attractive public offer.

USG shares were 0.1 percent off at 8.96 euros by 1410 GMT (9:10 a.m. EST), 52 percent lower in the year to date and giving it a market capitalization of 583 million euros.

This compared with a 38.4 percent drop in world number one staffing company Adecco's (ADEN.VX) share price and second-ranked Randstad's 47 percent fall. Staffing stocks have tumbled since mid-2007 after companies issued gloomy outlooks.

"In principle, it will not prevent a takeover but it will give the company more time to negotiate for a better deal. It's a delaying tactic, it could work," said analyst Herman Huizinga at Keijser Capital.

"They win time and they can look to other possibilities to prevent a takeover," he said.

USG's strength in the Benelux, its expanding presence in Germany and focus on the high-margin professional placement market make it an attractive target for its larger rivals.

Adecco, with its war chest of 1.4 billion euros, is on the acquisition trail after dropping its bid for Michael Page (MPI.L). U.S. rival Manpower (MAN.N) has also said it is on the lookout for possible buys.

"In the staffing market, it's all about scale. If you buy USG, you have one of the biggest players in the Benelux," said Frank van Wijk, analyst at SNS Securities.

"It would be nice to have a strong foothold in Randstad's own highly profitable home market."

LEGAL RISKS

Still, there are risks in USG's preference shares strategy, as evidenced by two Dutch companies which have taken the same route.