Adecco has boosted its position as the world's largest temporary employment firm with the €800 million (SFr 1.33 billion) takeover of the German Tuja Group.This content was published on June 18, 2007 - 12:27
The takeover follows last year's €666 million acquisition of German employment firm DIS and strengthens Adecco's position to 13 per cent of the temporary staffing market in the country.
Swiss-based Adecco has dipped into its cash reserves following a successful set of 2006 financial results to fund the Tuja deal, which includes €200 million of debt and is subject to market and regulatory approval.
"This is an important day for Adecco. I consider the German market as one of the most interesting ones in our industry," said Adecco chief executive Dieter Scheiff.
With only 1% temporary staffing penetration, this market benefits from structural changes and thus promises sustainable growth," he added.
Tuja offers staffing services mainly to the automotive, aerospace and metal industries. Adecco estimates revenues of €650 million and an operating income of €63 million from their latest acquisition in 2007.
Bank Vontobel analyst Scott Weldon said the takeover represents a good deal despite the debt Adecco has to cover.
"If you compare the cost of the acquisition with the predicted operating income then they are getting good value for money," he told swissinfo.
"Adecco is getting something that is growing much quicker than they are and we estimate it will enhance earnings per share by about three per cent.
"It's a very positive development for Adecco because it increases their exposure in a key market, bringing them in line with the current leader [Netherlands-based Randstad]."
Adecco's net profit in 2006 was up 35 per cent on the previous year to €611 million, lifted partly by the DIS takeover.
The company looks to have completed a turnaround in fortunes since former chief executive Jéröme Caille left in 2005 after a string of disappointing results.
It has announced a strategy of pushing into the higher margin professional staffing services market to become less dependent on high volume, low margin business.
Tuja does not specialise in professional staffing, but the acquisition is still in line with Adecco's stated goals, according to analyst Weldon.
"The reason Adecco wants to get into professional staffing market is because it is a high growth market. The Tuja deal does not move Adecco in this direction directly but it still fulfils the strategic criteria because Germany in itself is a fast growing market," he told swissinfo.
Adecco announced that it now has less than €1 billion for future acquisitions and said it would be in no hurry to spend it unless the right target appeared.
Swissinfo, Matthew Allen with agencies
Adecco 2006 results:
Net profit: €661 million, up 35% on 2005
Revenues: €20.4 billion, up 12%
Sales: €20.55 billion, up 12%
Adecco offers permanent and temporary staffing services in the commercial, industrial and technical sectors.
The group is present in 75 countries and employs more than 33,000 full-time staff around the world.
Around 700,000 people are employed worldwide through its temporary staffing services every day.
Adecco was born out of the merger of Switzerland's Adia and French company Ecco in 1996.
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