Adcorp deal to boost Paracon

Adcorp's R622 million bid for ICT recruitment company Paracon will create the largest listed recruitment company in SA.

The deal is also set to boost Paracon's growth prospects as it opens up opportunities to cross-sell in a market characterised by companies trimming their vendor lists.

Paracon and Adcorp announced yesterday that Adcorp was offering to buy all of Paracon in a deal worth R622 million. Paracon shareholders can elect to either receive R1.97 for each share they own, or swap 13.8 shares for one Adcorp share.

Paracon CEO Mark Jurgens says belonging to the Adcorp group will create opportunities to cross-sell its services to a larger range of clients. The deal will create an entity with a combined annual turnover of about R6.5 billion.

Adcorp has operations in staffing sectors such as permanent recruitment, flexible solutions and business process outsourcing. Paracon operates in permanent and temporary staff, and focuses on project management. It also has a 35% stake in India-based Nihilent Technologies.

Companies are increasingly trimming their supplier lists from hundreds of vendors to less than 10 suppliers, notes Jurgens. He says the deal will create the largest listed recruitment company with a nationwide presence that can offer an end-to-end solution.

Paracon will also be able to mitigate the risk of focusing on a single sector as it will have access to Adcorp's range of services and sectors, says Jurgens. He adds the combined company will be able to offer its clients more cost-effective services.

Adcorp does not have a large presence in the ICT staffing sector. CEO Richard Pike says buying Paracon will broaden its spectrum of staffing solutions, especially in the specialised niche area of ICT where it currently has a limited offering.

Jurgens says the companies have been in talks for a couple of years, but had not previously been able to settle on price. The current deal has been in the works since February, he adds.

So far, shareholders holding more than 50% of both Adcorp and Paracon have pledged to vote in favour of the deal. Jurgens says after shareholders vote, the acquisition will need Competition Commission approval, but he expects the deal to go through as the companies operate in different sectors.

Adcorp's buyout of Paracon is expected to be wrapped up by year-end, says Jurgens.