Adecco (ADEN.VX), the world's largest staffing company, is buying American rival MPS Group (MPS.N) for $1.3 billion, boosting its high-margin and more recession-resilient professional staffing business.

Adecco also said it was launching a 900 million Swiss franc ($888 million) mandatory convertible bond to accommodate the cash deal, though one rating agency promptly put its investment grade credit rating on watch.

This deal, plus the recent acquisition of Britain's Spring Group (SPGR.L), means close to 25 percent of group revenues will be generated in the more lucrative professional staffing arena, up from 17 percent in 2008.

We are delighted to have MPS Group become part of the Adecco Group, in a move that will see Adecco taking the world-wide lead in professional staffing, Chief Executive Patrick De Maeseneire said in a statement, who later added that this was the last big acquisition on the cards.

Adecco also sounded a more upbeat tone on its trading environment, saying market conditions had improved during the third quarter. The group will post quarterly figures on Nov. 5.

This acquisition is fully in line with Adecco's strategy to strengthen its professional staffing business, which offers higher margins and more attractive growth opportunities, Helvea analyst Chris Burger said in a note.

For a graphic on the deal click:


The move marks a significant coup for De Maeseneire who took over the helm in June from Dieter Scheiff. Adecco failed last year in its bid to buy professional staffing group Michael Page (MPI.L), which many believed was the reason behind Scheiff's departure.

After the unsuccessful try to take over Michael Page, MPS Group was chosen, which has a similar, or even slightly bigger, size in terms of sales, Burger said, adding the deal put Adecco ahead of rival Robert Half (RHI.N) in professional staffing.

By 0942 GMT, shares in the group were trading 3.85 percent lower at 52.50 Swiss francs, underperforming at 0.3 percent drop in the DJ Stoxx European industrial goods and services index .SXNP.

One Zurich-based trader said the convertible bond was putting pressure on the shares, since existing holders would see a dilution of about 8.7 percent. We will (also) see some hedge funds switching from the shares to the bond, he said.

Adecco would now focus on organic growth, De Maeseneire told Reuters. The big acquisitions are done now, he said. We now have a strong platform to grow organically.

Shares in staffing company USG People (USGP.AS) fell sharply on the news of the MPS Group deal as hopes that Adecco would snap up its Dutch rival faded fast.


MPS Group's board of directors has unanimously backed Adecco's offer of $13.80 per share, which represents a premium of 24 percent over the Florida-based company's last closing price.

At first sight the acquisition looks expensive at 10 times historic EV/EBITDA, said Kepler Capital Markets analyst Fabian Baumann. However, it is compliant with the strategy to increase professional staffing exposure.

MPS Group, which had revenues of 1.5 billion euros ($2.24 billion) in 2008, will also boost Adecco's UK and Canada business, and the deal will add to adjusted earnings per share in the first year, Adecco said.

Standard & Poor's said on Tuesday it had placed its BBB rating on Adecco on CreditWatch with negative implications as a result of the deal.

But Chief Financial Officer Dominik de Daniel said he was confident Adecco would be able to keep its investment grade rating thanks to the convertible mandatory bond offering.

The MPS deal is expected to close in the first quarter of 2010.

Adecco's news comes as Dutch group Randstad NV (RAND.AS) said Britain's NorthgateArinso was buying its human resources services unit Cian.

Adecco said Deutsche Bank(DBKGn.DE) was acting as global co-ordinator for the bond offering and the bank was also acting together with Credit Suisse (CSGN.VX) as joint lead managers and joint bookrunners for the offering.

MPS said BofA Merrill Lynch(BAC.N) was acting as its financial advisor. ($1=1.013 Swiss Franc) ($1=.6694 Euro) (Additional reporting by Ajay Kamalakaran in Bangalore, editing by Wil