April 16, 2018 / 5:28 AM / 5 days ago

Adecco buys General Assembly in $412.5 million deal to boost growth

ZURICH (Reuters) - Swiss staffing company Adecco Group (ADEN.S) is buying U.S.-based technology education provider General Assembly for $412.5 million including debt, it said on Monday, adding heavy investments in the business would initially drag on earnings.

FILE PHOTO: The new logo of Swiss Adecco Group is seen at its headquarters in Glattbrugg, Switzerland, January 31, 2017. REUTERS/Arnd Wiegmann/File Photo

General Assembly, whose founders include Hyatt hotels heir Adam Pritzker, is a private school business started in 2011 that provides training in fields such as data science and analysis. Its revenues in 2017 were about $100 million with a strong 2018 booking backlog, Adecco said in a statement.

Adecco has gone into acquisition mode to kickstart growth and address its lagging performance compared with faster-growing rivals, such as Randstad (RAND.AS).

Adecco said it saw synergies between General Assembly and its own training business, in particular the Lee Hecht Harrison career transition business.

“General Assembly is currently in a high-growth investment phase and is therefore expected to be modestly dilutive to Group earnings in 2018, the impact of which is included within the group’s current guidance on planned strategic investments,” Adecco said in a statement.

“From 2019, General Assembly is expected to be modestly accretive to earnings,” it added. “In the medium-term General Assembly’s EBITA (core earnings) margins are anticipated to be significantly higher than the group average.”

    Over the last three years, Adecco said General Assembly’s revenue had grown at a compound annual rate of 30 percent.

    The total enterprise value (equity plus debt) of the deal is $412.5 million, Adecco said, adding General Assembly would continue to operate as a separate division under its Chief Executive Jake Schwartz, a co-founder.

    General Assembly lists Viacom (VIAB.O), Pearson (PSON.L) and L’Oreal (OREP.PA) as clients, according to its website.

    Analysts from Zuercher Kantonalbank (ZKB), who earlier this month downgraded their rating on Adecco to “market weight”, said they were not expecting a big market reaction to the deal, which represents less than 1 percent of the Swiss company’s 23.7 billion euros ($29.2 billion) in annual sales.

    “The takeover price is high,” ZKB said. “However, there is a significant synergy potential and the growth profile of Adecco is slightly improved.”

    The shares fell 0.7 percent in early trading in Zurich.

    Editing by Louise Heavens and Mark Potter

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