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51Job Has Work Cut Out

BEIJING -- In a move that could crank up the heat on 51Job (JOBS - Get Report), its rival Zhaopin has won an investment from the leading Australian online recruiting firm.

On Wednesday, Melbourne-based Seek said it will pay $20 million for a 25% stake in unlisted Zhaopin, while also offering "strategic input and operational support," according to a written release. The acquisition is still subject to Zhaopin shareholder approval.

A re-energized Zhaopin will make it harder for top-ranked 51Job to consolidate its hold on China's online job market, according to Kit Low, a Hong Kong-based analyst at Goldman Sachs. "We expect Zhaopin to become more aggressive online, together with [second ranked] ChinaHR, and this could put more pressure on 51Job's online-business market share," writes Low.

Initially at least, 51Job shares were little affected by the news, closing down 1.7% to $14.11 in New York on Wednesday. The next day the stock was in positive territory again, finishing at $14.50.

51Job has a 20% share in China, compared to 15% for ChinaHR.com and about 9% for Zhaopin, according to Shanghai-based iResearch.

"We thought Zhaopin was a great player and had a strong management team. What they lacked really was access to capital," Andrew Bassat, co-CEO of Seek, said in an interview. "Because the China market is relatively early stage and high growth, that opens up opportunities that don't exist in a more mature market."
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