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Dutch Randstad to bid 3.51 billion euro for Vedior

Dutch staffing company Randstad Holding NV announced that it is going to bid around EUR3.51 billion (US$5.17 billion) in cash and shares for peer Vedior NV in an attempt to create the second-largest employment business in the world.

Randstad's cash-and-share offer was worth EUR20.19 (US$29.76) per Vedior share at Friday's closing price, a 64 percent premium over their value as of Thursday. Vedior shares rose more than 30 percent on Friday after news the companies in were talks leaked out.

The Amsterdam, Netherlands-based company would have combined sales of around EUR17.3 billion (US$25.3 billion) and operating profit of EUR883 million (US$1.29 billion) this year, Randstad said in a statement, making it the largest staffing company in Germany, Canada, India, The Netherlands, Poland, Belgium, and Portugal.

Adecco SA of Switzerland would remain larger in the U.S. and overall, while Milwaukee, Wisconsin-based Manpower Inc. would slip to third place globally.

In all, Randstad and Vedior send out 700,000 temporary employees daily, and have around 33,000 employees of their own.

While both Randstad and Vedior have an array of operations in more than 20 countries each, they have some complements and some overlaps.

Vedior has relative strength and expertise in the high end of the staffing market, providing highly trained or specialists workers - seen as one area of future growth.

Randstad, meanwhile, assists more large multinational companies - another growth area - and will be able to cross-sell services to Vedior clients.

"The combination will have a unique service offering for large industrial and logistics clients," the companies said in a statement.

"From a geographic perspective, the combination will have leading positions in most of the key staffing markets with additional growth potential from emerging staffing markets."

Randstad said it expected to reduce annual costs by EUR80 million (US$117 million) within 18 months by combining headquarters and offices - but it would need EUR60 million (US$87.8 million) in restructuring charges in order to do so.

Randstad Chief Executive Ben Noteboom said those estimates were intentionally "conservative" and did not take into account tax benefits or likely sales growth as a result of the combination. He said the deal would add to Randstad's per-share earnings "from day one."

Randstad shares fell on the threat of dilution and were down 11 percent to Ђ28.74 (US$42.36). After Friday's sharp rise, Vedior shares kept climbing Monday and were up 7.9 percent to Ђ18.35 (US$27.04).

Analysts focused much of their attention on Vedior's concentration in France, where it has 40 percent of sales, but is still behind Adecco and Manpower.

"We are not happy about this bid by Randstad as we think Randstad ... should be able to generate much more shareholder value by doing more attractive, smaller (acquisitions) in growth markets," Petercam analyst Thijs Berkelder told Dow Jones Newswires.

Noteboom said the companies had been in talks for several weeks before the leap in Vedior's share price Friday forced them to disclose the negotiations to the market. Dutch financial authorities are investigating.

"I hope they trace the source of this unwanted development and find them out," Noteboom said, adding that the companies had been close to a deal when the news broke.

He said the companies did not expect any forced layoffs as a result of the combination, and would more likely reassign workers whose jobs are redundant.

The bid will begin early next year and close in March or April, he said, adding that he didn't expect any trouble with regulators: No one staffing company holds a market share of more than several percent in any market, and companies "always have an escape" from staffing firms that try to overcharge, in the form of directly hiring their own employees.

Noteboom will retain his job, along with Randstad's chairman and chief financial officer. Vedior's chief executive, Tex Gunning, will "head the integration team."

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