Australian staffing firm Skilled Group (SKE: ASX) today confirmed that it is entering into further discussions with Programmed Group; a staffing, maintenance, and project services firm, in relation to a potential combination of the businesses.

The announcement comes four months after Skilled strongly rejected what it called an “unsolicited, conditional, and opportunistic” merger proposal from Programmed.

In December 2014, Programmed confirmed that it approached Skilled Group with what it described as a “merger of equals”. Under the initial offer shareholders of each company would hold 50% of the combined group, with “the opportunity to benefit from value created by anticipated synergies of more than AUD 20 million (USD 15.6 million)”.

Shareholders in Skilled would also receive 0.5032 Programmed shares (representing AUD 1.13 (USD 0.88) in value based on Programmed’s closing share price on the day prior to the proposal) plus AUD 0.25 (USD 0.20) in cash for each Skilled share.

In a statement released on 29 December 2014, Skilled advised that the deal was “opportunistically timed” and was based on a closing share price for the company that was “well below medium and longer term volume weighted average prices”.

According to the statement from Skilled, released today, Programmed has indicated that it is prepared to enhance the terms upon which the companies may be combined; and consequently, Skilled and Programmed’s boards have agreed that there is merit to pursuing further discussions.

In a separate statement, Programmed advised that it believes there is considerable merit in combining the businesses for both groups of shareholders and customers.

Should the companies merge, the Australian staffing market will become further consolidated, following the acquisitions of Chandler MacLeod Group and Peoplebank by Japanese recruitment juggernaut Recruit in January 2015.  

In trading today, Skilled Group’s share price closed up 11.8% at AUD 1.38 (USD 1.08), a decrease of 46% compared with a year ago. Based on its current share price, the company has a market value of AUD 327.3 million (USD 255.9 million).