LONDON (Menafn - MarketWatch) -- Randstad Holding NV on Monday said it will buy smaller Dutch competitor Vedior for 3.5 billion euros ($5.1 billion) to create the world's second-largest staffing group behind Adecco.
Randstad is offering 9.5 euros in cash and 0.328 share for each Vedior share. The offer gives Vedior an equity valuation of 3.5 billion euros and represents a 64% premium to the company's closing price on Nov. 29, the last day before friendly merger talks were announced. Vedior's board is backing the offer.
The deal will create a company with annual sales of about 17.3 billion euros.
The combination "represents a unique opportunity to create an industry champion of global size and scale," Randstad Chief Executive Officer Ben Noteboom said in a statement.
Vedior shares rose 9.9% to 18.68 euros in Amsterdam morning trading. Randstad shares fell 7.3%.
The new company will hold the No. 1 spot in Germany, the Netherlands, Belgium, Portugal, Poland, Canada and India and the No. 3 spot in France. Vedior derives about 40% of sales from France and 9% from the U.S.
UBS analysts told clients they were surprised by Randstad's desire to increase exposure to the mature French market. In addition, the broker said it expects integration challenges in the U.K. and the U.S., where operating structure is very different.
Randstad forecast the tie-up to generate annual pretax synergies of 80 million euros from headquarters savings, branch optimization and efficiency improvements. It said 75% of the savings should be achieved within 18 months of completion. In addition, 20 million of annual tax savings are expected.
Randstad said it expects the transaction to contribute to earnings from the outset, excluding one-off costs of 60 million euros.
The offer is subject to acceptance from owners of at least two-thirds of Vedior's capital and the deal is expected to be completed in March or April.
Turning to management, Randstad's current chairman, Fritz Froehlich, will be chairman of the new company, and CEO Noteboom will stay at the helm. The group's current chief financial officer, Robert-Jan van de Kraats, will also stay in place.
The integration team will be led by Vedior CEO Tex Gunning.
When preliminary discussions were unveiled on Friday, Credit Suisse analysts told clients that rivals Manpower, Inc. MAN and Adecco SA ADECY were unlikely to counterbid.
"Above all, we think that macro uncertainty is likely to limit the prospects of copycat actions by the other major players in the near term," the broker said.
Adecco shares inched 0.4% higher in Swiss trading after a strong performance on Friday.