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South Africa – Adcorp acquires Australian workforce management firm

31 October 2013

Workforce management group, Adcorp, announced today that it has offered a base purchase consideration of AUD 44.8 million (USD 42.5 million) to acquire 100% of Labour Solutions Australia (LSA), an Australian workforce management firm providing staffing solutions across blue and white collar roles in the agriculture, construction, mining, resources and transport sectors.

The acquisition is to be settled by way of a combination of cash and shares: 60% of the base purchase consideration will be paid to the vendors of the business in cash whilst the balance will be settled in Adcorp shares.

The final purchase consideration will depend on the earnings before interest, taxation, depreciation and amortisation achieved by the business of LSA during the 12 month trading period 1 July 2013 to 30 June 2014, subject to a minimum purchase consideration of AUD 26.9 million (USD 25.5 million) and a maximum purchase price of AUD 51.5 million (USD 48.9 million).

Adcorp Chief Executive, Richard Pike, said that the acquisition will significantly strengthen the Group’s foothold in the Asia Pacific region where it already owns leading Australian IT recruitment and contracting business, Paxus, and has a stake in Indian IT services and solutions business, Nihilent.

He said: “Labour Solutions Australia is an attractive, highly cash-generative business which will provide Adcorp with exposure to attractive industries in the Australian economy. Labour Solutions Australia has a dynamic, experienced and motivated management team and has a well-established national platform with a strong support network.”

Andrew Northcott, LSA Managing Director, commented: “Joining the Adcorp Group is a hugely positive step in the evolution of the Labour Solutions Australia business for both the team and our valued clients. I am excited about the future involvement of Adcorp and believe that it will provide greater opportunities for growth, the sharing of ideas and knowhow between the businesses, an ability to service mutual clients across a broad geographic spread as part of a bigger, international workforce management Group such as Adcorp.”

Founded in 2004 by Mr Northcott, the business currently operates in 36 locations across Australia.

 “I am firmly committed to the future of Labour Solutions Australia and Adcorp and I am excited about the prospects this tie-up holds for the business and our clients,” he added.

“The acquisition of Labour Solutions Australia will provide a number of financial and operational benefits, and opportunities,” reports Adcorp. “These include acquiring the business at a relatively early stage in its growth cycle with potential for significant future growth as well as a greater ability to service the Adcorp Group’s multinational blue collar client base across extended geographies, particularly in the areas of mining and resources. The acquisition also adds further scale advantage to Adcorp’s existing Australian operations and provides an opportunity to create a central Australian treasury function for the Group”.

Mr Pike continued: “Adcorp’s philosophy with regard to acquiring businesses has always been to buy successful businesses and to create an environment conducive to perpetuating and building on this success. Labour Solutions Australia will be no different. As such, it is not our custom or intention to change the management style of the business, and Adcorp intends to continue offering employment to all of those employees currently working for Labour Solutions Australia.”

“I believe that this acquisition will be very positive for the Adcorp Group. In addition to the benefits mentioned, it offers good opportunities for earnings growth, margin accretion, cash generation, geographic spread and access to the buoyant Australian agricultural sector. It’s the type of business that will integrate well with the Group’s existing operations, and I am extremely excited about the prospect of Labour Solutions Australia, its management team and staff joining the Adcorp Group,” Mr Pike concluded.

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