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Adecco, the world's largest staffing company, has bought American rival MPS Group for $1.3 billion, boosting its position in the high-margin professional staffing business.
To shore up its balance sheet and protect its investment grade credit rating in the wake of the cash deal, Adecco also said on Tuesday it was launching 900 million Swiss francs ($888 million) of mandatory convertible bonds.
"We are delighted to have MPS Group become part of the Adecco Group, in a move that will see Adecco taking the world-wide lead in professional staffing," Chief Executive Officer Patrick De Maeseneire said in a statement.
Adecco also sounded a more upbeat tone on its trading environment, saying market conditions had improved during the third quarter and had developed in line with its expectations.
The group will post quarterly figures on Nov. 5.
One Zurich-based trader welcomed the move to increase its share of the more lucrative professional market, but said: "The financing through the convertible bond will put shares under some pressure today, since dilution is around 8.7 percent and we will see some hedge funds switching from the shares to the bond."
"The price seems to me at the upper end, with P/EBITDA of 9.9 times," he added.
Adecco shares opened 2.9 percent lower.
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Unanimous Backing
MPS Group's board of directors has unanimously backed Adecco's offer of $13.80 per share, which represents a premium of 24 percent over the Florida-based company's previous last closing price.
This deal, as well as the recent acquisition of Britain's Spring Group [SPGR-LN Loading... ()] , means close to 25 percent of Adecco's group revenues will be generated in the more lucrative professional staffing arena, up from 17 percent in 2008, Adecco said.
The move marks a significant coup for De Maeseneire who took over the helm in June from Dieter Scheiff.
Adecco failed last year in its bid to buy professional staffing group Michael Page [MPI-LN Loading... ()] , which many believed was the reason behind Scheiff's departure.
Adecco has repeatedly said it was on the prowl for acquisitions and that it wanted to strengthen its professional staffing business.
MPS Group [MPS
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] , which had revenues of 1.5 billion euros ($2.24 billion) in 2008, will also boost Adecco's UK and Canada business, and the deal will be earnings accretive on an adjusted earnings per share basis in the first year, Adecco said.
The transaction is expected to close in the first quarter of 2010.
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