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Educor deal locks teaching into recruitment
The acquisition of PAG Placements means Educor can service the 'contingency workforce' market, writes MARCIA KLEIN
The latest deal follows closely on Educor's R70-million acquisition of Renwick Group, announced just a few weeks ago. The two deals make Educor a major player in the recruitment industry. Educor says it will fund the PAG deal through the issue of 24.77-million Educor shares, placed with institutions at 435c a share. Educor's share fell 20c to 415c on Friday ahead of the deal, but recovered to close unchanged from Thursday's 435c. PAG gained 80c to a 690c high. According to Educor, PAG Placements has a net asset value, excluding trademarks, of R15-million and pre-tax profits of R8.5-million. If the acquisition had been effective in the year to December 1996, Educor's earnings would have been 1.4c higher than the 8.2c already reported. The PAG and Renwick deals together would have added 30.5% to earnings, bringing them to 10.7c a share. Net asset value would have been 124% higher at 98.6c a share. Educor chief executive Nielen Brummer says Educor's strategy is to buy businesses "that are synergistic with Educor and whose long-term growth profile matches that of Educor". He says both Renwick and PAG have shown strong growth over the past few years in an exciting growth industry. Both are expected "to significantly enhance future Educor earnings". Educor director and Renwick chairman Charles Rowlinson says the PAG deal makes Educor "the leading recruitment firm in South Africa, covering all aspects from executive search and management selection and office to technical support in both permanent and temporary staffing industries". Rowlinson says the acquisition is strategic because it fills the sector of the market currently unoccupied by Renwick, which operates mainly at the top end of the recruitment market. He says one of the fastest growing business trends is the move from permanent to temporary employment, and the growth of the temporary workforce is estimated globally at over 15% a year. Fortune magazine estimated that by 2000, 60-million Americans or half of its potential workforce will be part of a "contingency workforce". Renwick has nine divisions and PAG Placements 24 branches. The integration of computer systems and databases throughout the group will offer economies of scale, while Educor's 40 campuses "will act as a strong feeder for its recruitment businesses". Recently Educor announced a 28% improvement in attributable profit and a 20.5% increase in earnings a share, well above pre-listing forecasts. Brummer said at the time the results reflected organic growth and acquisitions of Eden College and the Graduate Institute of Management and Technology. He said, being ungeared, Educor was looking at further acquisitions. The PAG acquisition, like Renwick, is effective from March 1 and will need the approval of shareholders and the JSE.
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