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Japan – Recruit Holdings’ secures cash for overseas acquisition spree

21 October 2014

Following its high-profile debut on the Tokyo Stock Exchange last week, Japan’s largest staffing firm Recruit Holdings (6098: JP) has amassed a substantial war chest for its intended global acquisition campaign, reports asia.nikkei.com

In the largest IPO offering so far this year, Recruit first traded at JPY 3,170 (USD 29.61), above its IPO price of JPY 3,100 (USD 28.96). It ended its first day of trading at JPY 3,330 (USD 31.10), rising as high as JPY 3,600 (USD 33.63) the following day, pushing the company’s market value above JPY 2 trillion (USD 18.9 billion).

The company’s gains are all the more impressive considering the Nikkei tumbled more than 400 points at one point.

Investors appear to be welcoming the company's strategy to carve out a slice of the global industry through acquisitions. Some analysts say the stock market's sharp decline, due to concerns over the darkening world economy, helped, rather than hindered, Recruit.

"Recruit has a broad array of businesses that are not easily affected by overseas factors," an analyst at a brokerage firm commented, adding that the stock has attracted investors because a massive selling of newly listed shares is unlikely.

Sales promotion media is Recruit's largest source of profits, followed by human resources media and staffing services. The company has kept growing by shifting its strategic focus from the publication of free job-placement magazines to internet-based services.

Recruit's growth strategy is now focused on overseas expansion, where it hopes to capitalise on its expertise and enhance its information technology acumen, President Masumi Minegishi explained.

Japan's largest staffing company plans to use roughly JPY 100 billion (USD 934.1 billion) of the sum raised from its listing and borrow even more to buy foreign rivals.

"We hope to become the world's top human resources service provider in 2020 and the top marketing company by 2030," Mr Minegishi stated, adding that his company in the future could make large-scale acquisitions of over JPY 100 billion (USD 934.1 billion).

However, not all investors are sold. A fund manager at a foreign investment company points out that the history of Japanese companies' big overseas acquisitions is littered with disasters, and Recruit has not been tested in this regard.

The company's goal of becoming the world's largest human resource services provider by 2020 is ambitious, given that the top three staffing industry players; Adecco, Randstad, and ManpowerGroup, all achieve more than USD 18 billion in annual sales, roughly double Recruit’s annual sales.

In trading today, the company’s share price closed down by -0.9% at JPY 3,765 (USD 35.17). Based on its current share price, the company has a market value of JPY 2.16 trillion (USD 20.2 billion). On this basis it is already the world’s largest staffing firm by market capitalisation, some way ahead of its nearest international rivals.