Randstad deal to acquire Monster.com draws opposition from MediaNews Group
The newspaper company, owned by the private equity company, Alden Global Capital, objects to the sales price and recommends employee layoffs, outsourcing, and asset sales as a way to turnaround the online recruitment company
The deal to acquire the online recruitment company Monster has drawn some opposition from MediaNews Group (Digital First Media) which owns an 11.6 percent stake in Monster. According to MediaNwesGroup, the newspaper chain that publishes the Denver Post among other papers, the price of the deal proposed by Randstad is far too low.
Background: On August 9, Randstand, the Dutch multinational human resource consulting firm, said it would acquire Monster Worldwide Inc. for $3.40 per share in cash, or a total purchase price of approximately $429 million. Monster stock has had a 52 week high of $8.17, but fell in January and today is trading at $3.44 a share.
That same day, Monster had reported disappointing earnings, and after a $142 million impairment charge, an operating loss of $150.6 million on the quarter. Revenue came in at $150.9 million, down from $167.7 in the same quarter the previous year. The results drove down the value of the stock to $2.77.
But the company was able to cancel its earnings conference all in light of the acquisition announcement.
“Joining Randstad provides a unique opportunity to accelerate our ability to connect more people to more jobs,” said Tim Yates, CEO of Monster. “Together with Randstad, Monster will be better positioned to fulfill our core mission, and our employees will benefit from becoming part of a larger, more diversified company. Equally important, this transaction offers immediate value to our shareholders. We are excited to join and be supported by Randstad, as we continue to build the best recruiting media, technologies, and platforms. We look forward to working with the Randstad team to ensure a smooth transition.”
Now, however, one shareholder is not so sure the deal is a good one.
Today, MediaNews Group sent a letter to the Board of Directors of Monster Worldwide, Inc. opposing the deal, and complaining that there seemed to be no effort to properly market the company,
“It is our understanding that the Randstad deal was not the result of a formal auction process,: the letter states. “It seemed to come together very quickly (Randstad executed a confidentiality agreement on June 20th, and a deal was announced just 50 days later on August 9th), apparently without any attempt to fully market the Company in recent months. We think a more thoughtful strategic alternatives review, which includes a detailed review of business operations and restructuring options, in conjunction with a robust auction process, would be a more prudent course of action vs. selling to Randstad at $3.40 per share. Given the no-shop provision the Company has agreed to in its merger agreement with Randstad, we welcome the opportunity to speak with other potential buyers to discuss their interest in the business.”
According to MediaNews Group, the $3.40 price equals a 4.9x multiple of annual EBITDA of $87.6 million and a less than 1X multiple of revenue.
Multiples can, of course, vary. In a stable company, a multiple of at least 2 times revenue can be expected, and a multiple of EBITDA can be anywhere between 10 to 15 times. But few company situations are the norm, actually, which is why sometimes the easiest way to price a company is to price it based on its stock price.
MediaNews Group then recommends a series of actions, most of which involve cost cutting, selling of assets, and outsourcing much of its technology infrastructure.
In other words, MediaNews Group, a company owned by the private equity company Alden Global Capital, is proposing that Monster manage itself like so many media companies are managed, through layoffs, and asset sales.
Gotta love private equity companies… or not.