Back-door listing Chandler Macleod Group has confirmed plans to list on the Australian Stock Exchange. But rather than make an initial public offering, the recruitment firm has opted for a back-door listing. It will merge with staffing firm Forstaff and conduct a reverse takeover of former credit agency NCML Holdings, which is already listed. NCML will pay $119 million for Chandler and Forstaff by issuing 119 million shares at $1 each, following a 5.82-to-one consolidation of its existing shares. Chandler shareholders will own 52.6 per cent of the new entity, which will be called Chandler Macleod Ltd and have market capitalisation of $128 million. Other shareholders will include Babcock & Brown, which owns about 20 per cent of Forstaff. James Hall
Merger will create leading HR player Author: Damien Lynch Date: 11/03/2005 Words: 212 Source: AFR Publication: Australian Financial Review Section: Professional Services Page: 61
Leading HR outsourcing and recruitment companies Chandler Macleod and Forstaff plan to merge and create Australia's second-largest listed HR company after Skilled Engineering. The proposed listing will come through National Credit Management Ltd (NCH) of Adelaide, which has entered into a conditional agreement to buy the two entities by issuing shares worth $119 million. Directors at NCH, which has sold its core credit management business, believe the acquisitions will allow it to become a major participant in a profitable growth industry. "The $10 billion dollar recruitment sector is highly fragmented, comprising large numbers of small operators. The industry is ripe for consolidation. Size and access to funds will be essential to achieving long-term growth and improved market strength," NCH said in a statement. "The merger, acquisition and ASX listing by reverse takeover will strategically place the combined group to take advantage of the anticipated consolidation of this sector." It added that a key objective in the first 12 months would be the integration of the two businesses to achieve operational efficiencies and extend the range of service offerings to clients and candidates. Completion of the acquisitions is subject to NCH shareholder approval and a number of other conditions, including each party completing satisfactory due diligence inquiries.
Recruiters catch merger and IPO mania Author: MARTIN PRETTY Date: 12/03/2005 Words: 1152 Source: AFR Publication: Australian Financial Review Section: Market Wrap Page: 47
The recruitment sector is back in vogue. Australia's 14-year run of economic growth has left employers screaming for suitable candidates to fill the vacancies created to meet client demand. So the recruitment and human resources industry has come out of hibernation and is thriving. Against that backdrop, plans were released during the week about a merger between human resources players Chandler Macleod and Forstaff, which will together backdoor list through NCML (Holdings) and emerge as the second-largest player in the industry behind Skilled Engineering. Joining Chandler Macleod on the sharemarket will be a Canberra-based IT recruitment company called PeopleBank. It's understood the company will pass 45 per cent of its stock to the public, equating to an initial public offering of about $12.4 million for a market capitalisation of $27.5 million. The offer will be priced at 10 times 2005 earnings, compared with Hamilton James & Bruce Group's annualised price earnings ratio of about 14.6 times and the higher-profile Talent2's multiple of about 24 times. The key vendor is private equity house Quadrant Capital, which last year paid $11 million in debt and equity to take a stake and help fund PeopleBank's acquisition of the Australian Personnel Services arm of Nasdaq-listed iGate. PeopleBank has been operating for about 15 years and the merger with Australian Personnel Services is expected to create an entity with revenues of about $100 million. The IPO is to be managed by boutique Quadrant Capital, which also sold Undercoverwear to the market last year. That float has more than doubled in value since listing. Another recruitment company making its way to the sharemarket is Challenge Recruitment, which was formerly known as Workforce Automation Technologies. Challenge recorded $92 million revenue for fiscal 2004, but posted a net profit of only $580,000 that it blamed on high workcover and other statutory costs. But the biggest upcoming IPO in the recruitment industry is online job classifieds group Seek. Seek shareholders met in Melbourne on Friday to approve the planned restructuring that will result in its IPO after Easter, with a proposed market capitalisation of about $500 million. One thing investors need to be wary of is the cyclical nature of the industry. In 1999 and 2000 there was a similar flurry of activity, with Julia Ross floating the company now known as Ross Human Directions, alongside Hamilton James & Bruce Group and Catalyst Recruitment Systems. A few years earlier Candle Australia appeared on the bourse. All of these stocks spent several years in the doldrums as the employment cycle turned against them, but have risen over the past 12 months. Ross Human Directions is now trading at 84 ?, compared with its $1 issue price, but has recovered from less than 50 ?. Similarly, HJB is trading at 64 ? compared with its issue price of $1. The standout has been Candle Australia, which closed at $2.26 on Friday, compared with its issue price of $1
Macleod seeks silver lining from listing Author: James Hall Date: 14/03/2005 Words: 775 Source: AFR Publication: Australian Financial Review Section: Companies and Markets Page: 12
Acquisitive Chandler Macleod says bigger is better in human resources. James Hall reports. Chandler Macleod Group will look at potential acquisitions in the fragmented human resources sector once it hits the Australian Stock Exchange, which will follow a shareholder vote to approve its backdoor listing in May. The recruitment and consultancy firm last week said it would carry out a reverse takeover of listed former credit management company NCML Holdings and a merger with smaller unlisted human resources firm Forstaff. NCML's shares shot to 27.5 ? when the news broke, after languishing below 20 ? since the year began, barely trading at all. The new entity, Chandler Macleod Ltd, should become the second-largest listed recruitment company in Australia behind the $270 million Skilled Group. Skilled commands about 8 per cent of the market, and Chandler Macleod will have about 7 per cent on listing. But managing director Stephen Cartwright says he wants at least 15 per cent in the near term. This would represent turnover of $1.5 billion, which means buying other companies. Cartwright says listed companies in his industry must either scale up or become irrelevant as more clients seek to rein in swelling HR costs by dealing with one large supplier. "If you look at trends overseas, consolidation has happened and it's a natural consequence of clients becoming more educated and more demanding in terms of service consistency, your ability to provide comprehensive management reports and link up with their IT systems." Cartwright points to logistics group Toll Holdings as a role model. "Before Toll got serious, you had companies that had grown as a result of a logistics boom. Toll saw there needed to be consolidation but took its time. We're going to go exactly the same way. "We're not going to rush at it because there's no screaming hurry. I've learnt from other sectors that you have to take it slow and steady." One target could be $39 million white-collar recruiter Hamilton James & Bruce, in which Chandler Macleod Group's major shareholder, the Plummer family, is also a shareholder. Analysts say the human resources sector must mature if it is to extend profits beyond this phase of the demand cycle and avoid being usurped by global giants such as Adecco. Paradice Cooper Investors portfolio manager Matthew Riordan says institutions have been unable to take part in the sector's recent growth because its companies are relatively small. So he welcomes Chandler Macleod's listing and the much-anticipated float of online job agency Seek. "A lot of the existing companies are too small to invest in," he says. "These new listings give the market opportunities to participate in what's been a pretty buoyant sector." Another problem is that Skilled, the only listed human resources firm that gets mainstream broker coverage, is unpopular with analysts. UBS emerging companies analyst Alex Mees has long held a "reduce" rating on the stock, while Citigroup Smith Barney recently highlighted the high degree of risk it carried. Chandler Macleod and Seek are not the only candidates for listing. Pengana, the private equity firm backed by Liberal MP Malcolm Turnbull, says it is rolling up several smaller recruitment agencies that it may eventually list, while micro-caps PeopleBank and Challenge Recruitment also plan to list. Chandler Macleod's market capitalisation of $119 million will produce a price to projected earnings multiple of just 4.6 times. But the company will have only $7 million cash at listing, as the all-paper reverse takeover will not generate any capital. Under the proposal, NCML plans to consolidate its shares at a ratio of roughly five to one, before paying $119 million in $1 shares for Chandler Macleod and Forstaff. As NCML's market cap is only $10 million, it will cover the shortfall by issuing new $1 shares. So it's likely that the new company will have to engage in some kind of capital raising soon, unless it plans to dilute the value of investors' holdings with another all-paper takeover. JML Australia chief executive Jon Leighton, whose corporate advisory firm looked after the float of Hamilton James & Bruce in 2000, says nothing will stop the Chandler Macleod listing going ahead. The general meeting to approve the deal seems a formality: the companies are tightly held and NCML has been in a state of inertia since the sale of its credit management business. Other potential consolidators in the industry include Integrated Group, Candle Australia and Talent2 International. Smaller firms Ross Human Directions, Catalyst Recruitment Systems and Ambition Group are considered unlikely buyers.
