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UK - Michael Page's shares up amid takeover rumours

24 August 2011

The shares of Michael Page International Plc (MPI:LSE), the specialist recruitment consultancy, jumped +11.8 Pence or +3.36% to 362.3 Pence last night as dealers heard late whispers that staffing giant Randstad could be lining up a 1.58 billion Pounds or 5 Pounds a share cash offer for the company, specialist publication This is Money reports.

Michael Page is more vulnerable after warning recently that current trading was 'challenging' because of a slowdown in banking, which makes up 10% of Michael Page's bottom line profits.

Michael Page recently reported an increase in operating profits of +40% to 45.4 million Pounds in H1 2011 when compared with H1 2010. However, this was -12% below analysts' consensus estimates. Investors failed to respond to the growth in both revenues and profitability and seemed more absorbed by the company's cost increases, weaker gearing and more cautious outlook. The share price improved again this morning to 370.90 Pence which is still 35% below the 52 week high of 567 Pence recorded on 27 April 2011.

Elsewhere in the media, Adecco was also named as a potential acquirer. The world's largest staffing agency made an unsolicited Offer for Michael Page in 2008, valuing the Company at 400 Pence per share, before pulling out after being rejected twice. At the time, Analysts speculated that an Offer closer to 450 Pence would get board approval. However, Adecco has recently ruled out making any large acquisitions.

Broker Merchant Securities does not appear to believe a bid will materialise as it yesterday downgraded the stock to sell from buy and slashed its target price to 300 Pence from 625 Pence. The broker also cut its full-year pre-tax profit forecast by -17% to 95 million Pounds and next year's to 115 million Pounds from 164 million Pounds because the level of economic uncertainty has increased significantly over the past few months.

If the Company has been approached, it must have happened very recently given that two Michael Page directors acquired shares last week which indicates that there are no price sensitive matters to disclose.

Deutsche Bank yesterday called Michael Page "the highest quality recruitment firm under our coverage", although the broker kept its "hold" rating, saying current fears over the economic climate meant there was "too much downside risk in the shares".


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