Australia’s biggest workforce provider Skilled Group has rejected a takeover offer from rival Programmed Maintenance Services, saying it undervalues the company.
Skilled says Programmed’s offer to create a $700 million staffing and facilities management group is not compelling given its own strong market position and growth opportunities.
But Skilled appears to be open to holding more talks.
“The terms of Programmed’s proposal do not reflect the value of Skilled shares and the contribution that Skilled would make to a combined group,” chairman Vickki McFadden said on Thursday.
“We remain open to considering a transaction on terms that appropriately reflect Skilled’s value and contribution to a merged group.”
Programmed, which operates labour hire businesses in New Zealand and Australia, made its non-binding merger of equals offer to Skilled on December 17, arguing the deal could unlock more than $20 million in annual savings.
Skilled initially branded the offer opportunistic as its shares had halved in a fortnight that month.
The offer was for a 25-cents-a-share cash payment to Skilled shareholders, on top of an equal 50 per cent stake in the new combined entity.
Skilled says it was already the market leader in blue-collar labour hire in Australia, and believed the addition of Programmed’s business would not alter that position.
It also argued the $20 million in annual savings would take a number of years to flow through.
Most of the savings would come from the removal of duplicate corporate overheads, which would not necessarily enhance growth opportunities for the combined entity.
“While a merger would create a larger presence in some industry sectors and provide some diversification, it is not clear that a merged business would be better strategically positioned than Skilled is at present,” Skilled said.
As technical labour hire businesses, both companies have faced similar economic headwinds related to the downturn in the mining sector and falls in commodity prices.
Both provide a range of maintenance and project services as well as skilled labour, including marine services exposed to the oil and gas sector.