22/01/2015 - 09:05

Skilled rejects Programmed merger

22/01/2015 - 09:05

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Australia's biggest workforce provider, Skilled Group, has rejected a takeover offer from rival Programmed Maintenance Services, saying it undervalues the company.

Skilled rejects Programmed merger
Skilled chairman Vickki McFadden.

Australia's biggest workforce provider, Skilled Group, has rejected a takeover offer from rival Programmed Maintenance Services, saying it undervalues the company.

Skilled says Programmed's offer to create a $700 million staffing and facilities management group is not compelling given its own strong market position and growth opportunities.

In a statement today, Skilled said that while a merger would create a larger presence in some industry sectors and provide some diversification, it wasn't clear that a merged business would be "better strategically positioned" than Skilled was at present.

"Skilled is already the market leader in blue-collar labour hire in Australia, recognised for the quality of its people and its excellent safety record and customer service," the company said in a statement.

"The addition of Programmed's business would not significantly alter this position."

But according to Skilled chairman Vickki McFadden, the Hawthorn-based company would still be open to holding more talks.

"The terms of Programmed's proposal do not reflect the value of Skilled shares and the contribution that Skilled would make to a combined group," Ms McFadden said.

"We remain open to considering a transaction on terms that appropriately reflect Skilled's value and contribution to a merged group."

However, she said the company had a bright future as a standalone business.

"The board and management team are focused on executing our current strategy. With Angus McKay recently joining as CEO to lead Skilled through its next stage of development, we will provide an update on our strategy to deliver value for Skilled shareholders in due course," Ms McFadden said.

In response to Skilled's decision, Programmed chairman Bruce Brook said the proposal represented a compelling value to Skilled shareholders.

"A number of independent analysts have assessed the merger terms as reflecting the approximate earnings contributions of both companies," Mr Brook said.

"The proposal is not about the past, it is about the future."

Programmed, which operates labour hire businesses out of its headquarters in Burswood, made its non-binding merger of equals offer to Skilled on December 17, arguing the deal could unlock more than $20 million in annual savings.

Skilled initially branded the offer opportunistic as its shares had halved in a fortnight that month.

The offer was for a 25 cents per share cash payment to Skilled shareholders, on top of an equal 50 per cent stake in the new combined entity.

Skilled argued the $20 million in annual savings would take a number of years to flow through.

Most of the savings would come from the removal of duplicate corporate overheads, which would not necessarily enhance growth opportunities for the combined entity.

"While a merger would create a larger presence in some industry sectors and provide some diversification, it is not clear that a merged business would be better strategically positioned than Skilled is at present," Skilled said.

As technical labour hire businesses, both companies have faced similar economic headwinds related to the downturn in the mining sector and falls in commodity prices.

Both provide a range of maintenance and project services as well as skilled labour, including marine services exposed to the oil and gas sector.

Mr Brook said Programmed had not been in discussions with Skilled since the proposal was made but the company "remained open to discussions and any suggestions that Skilled might wish to make to effect a merger that would benefit both companies' shareholders".

"We strongly believe this proposal to be in the best interets of both companies and their shareholders," he said.

Programmed last week announced it had partnered up with Perth-grown international human services company Advanced Personnel Management.

Programmed shares closed 2.89 per cent lower at $2.35 per share.

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