Randstad To Acquire SFN Group

AMSTERDAM, July 20, 2011 /PRNewswire/ --

Key points

• Randstad to acquire SFN Group through a cash tender offer at $14 per share
• Randstad will become the third-largest HR services provider in North America
• A unique strategic fit: enhancement of service offerings and geographic coverage
• The transaction will be immediately accretive to Randstad's earnings per share
• Randstad has agreed on a new syndicated revolving credit facility

Creating a leading HR services provider in North America

Randstad (RAND.AS), the second largest HR services provider in the world, and SFN Group (NYSE: SFN), a leading workforce solutions company in North America, today announced that they signed a definitive agreement whereby Randstad will acquire SFN Group through a cash tender offer. As a result of the acquisition, Randstad will become the third-largest HR services provider in North America, doubling its presence in the US and reinforcing its leading position in Canada. Randstad and SFN Group have a comparable service offering in North America and a complementary geographic coverage, which creates a unique strategic fit.

In North America, the combination will have revenues of $4.6 billion (pro forma, LTM March 31, 2011) of which 39% in Professionals, 52% in Staffing and 9% in HR Solutions (Payrolling, Managed Services and Recruitment Process Outsourcing). This represents under 5% of the highly fragmented North American HR Services market. The combination will have over 5,000 employees and operate from over 1,000 outlets. As a result of the transaction, the Randstad Group will have combined revenues of approximately $22 billion/ euro 17 billion (pro forma, LTM March 31, 2011).

Randstad plans to commence a cash tender offer for all shares at $14 per share. The transaction is subject to customary closing conditions including regulatory approvals and the tender of at least 50% of SFN Group's outstanding shares. The transaction has been unanimously approved by the boards of both companies. Randstad expects to close the transaction in September 2011. Randstad will finance the transaction by borrowings under its existing credit facilities.

Ben Noteboom, CEO of Randstad says : "We are very excited about the opportunity to become a leading company in North America. SFN Group is a great company with professional and dedicated people, a good match with Randstad. The future combination will increase opportunities for growth and development of all employees. And by sharing best practices and leveraging the cross selling potential, we will be well-positioned to offer our clients and candidates an unrivaled portfolio of services. We are proud to be taking another step in shaping the world of work."

"The executive management and I are confident that the combination of our two companies is a strong strategic fit that will not only deliver expanded service offerings for our clients in North America, but also creates opportunities to service them on a global basis,"  says Roy Krause, SFN Group President and Chief Executive Officer . "Both companies have complementary cultures and values which will provide growth opportunities for our staff associates."

Compelling strategic rationale

The HR services industry is still relatively young, highly fragmented and continues to develop quickly. Over the years, Randstad and SFN Group each have expanded rapidly through a combination of organic growth and a series of successful acquisitions. Many global trends impact the industry, ranging from demographic changes, skills shortages, the increasing need for flexibility and the growing customer need for global one-stop solutions. Randstad and SFN Group will have the scale and scope to capitalize on these trends in the U.S. and Canada. The combination will benefit both clients and candidates and offers more development opportunities for all employees.

By combining with SFN Group, Randstad becomes a leading HR services provider in the U.S. and Canada offering an unrivaled portfolio of services and will be well-positioned to match candidates with clients who are looking for a total offering.

The acquisition of SFN Group fits perfectly into Randstad's stated strategy:

• Randstad becomes a leader in the Professionals staffing segment in North America, with significant expertise in IT and Finance & Accounting;
• Randstad will hold a number two position in the administrative segment and a top five position in the light industrial staffing segment;
• The density of Randstad's office network will be significantly enhanced across the U.S.;
• With Inhouse Services, Randstad has a unique service offering for large industrial and logistical clients;
• Randstad becomes the leader in Recruitment Process Outsourcing in North America with an enhanced platform for growth in Managed Services.

Significant opportunity for value creation

Randstad and SFN Group will capture the significant growth opportunities available in the North American market through its leading positions in key segments and improved geographic coverage. In addition, the combination will benefit from significant cross-selling opportunities, such as through the introduction of inhouse services and sharing of best practices and processes. Combined with further efficiency improvements and office optimizations, it is expected that the combination will generate $30 million of annual run rate pre-tax cost synergies. Most of the synergies will be achieved within the first year after completion of the transaction. By combining the two businesses and based on Randstad's unique financing and tax structure, Randstad will be able to generate additional recurring tax savings of around $10 million. Integration costs to capture these synergies are estimated to amount to around 80% of the annual cost synergies. The integration process is expected to start as soon as possible and will be built on the valuable experiences gained during recent integrations and by involving people from both companies.

The transaction is expected to be immediately accretive to Randstad's earnings per share and ROIC is expected to surpass Randstad's cost of capital (WACC) within 3 years based on a moderate growth scenario.

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