Recruitment and employment services company Chandler Macleod Group Limited (ASX: CMG) has soared by more than 80% today to 53 cents, after receiving a takeover offer.
Japanese staffing firm Recruit Holdings Co Ltd is buying Chandler in a deal worth $290 million, and assuming the company's debt obligations or around $92 million. The listed Japanese company is one of the world's largest human resources firms with a market cap of around A$21.5 billion.
Shareholders in Chandler will receive a cash payment of 53 cents per share, plus a fully franked dividend of 1.7 cents per share to be paid by Chandler. Court and regulatory approval are required, as is the approval of more than 50% of Chandler's shareholders.
Chandler was in the middle of a turnaround, as sales and net profit plummeted in the 2013 financial year, although net profit improved last financial year thanks to a lower tax rate and less one-off items.
At the same time, the company had increased its debt from ~$62 million in 2011 to $115 million in 2013 while raising share capital by $40 million over the past four years.
As a result, this appears to be a good deal for shareholders, although shares did hit a five-year high of 65 cents in April 2013.
The price offered for Chandler represents a multiple of around 9.5x earnings before interest, tax, depreciation and amortisation (EBITDA). Not exactly cheap, but not too expensive in relative terms.
But the deal may place additional pressure on Programmed Maintenance Services Limited (ASX: PRG) to lift its offer for Skilled Group Ltd (ASX: SKE). Skilled offers workforce solutions, employing over 50,000 workers a year, so is in the same sector as Chandler.
Programmed has proposed a friendly merger with Skilled, placing an enterprise value of around $500 million on Skilled. But with Skilled producing $101.5 million in EBITDA last financial year, that represents a multiple of just 4.9x. No wonder Skilled's board is wary of the offer and labelled it "opportunistic".
Programmed may well have to lift its offer if it wants to merge with Skilled – and it's fairly easy to see why Chandler Macleod's board have given their deal their seal of approval.
