The agreement sees Northgate purchase 9 million shares from Arinso’s founder and CEO Jos Sluys. Each share will be exchanged for 18.75 euros plus five new Northgate shares. This values Arinso overall at 375m euros ($510m), and offers a 23% premium on the closing price of its shares on Tuesday. Northgate’s shares fell almost 6% in anticipation of the effects of dilution.
The transaction only needs the approval of Northgate shareholders so it is expected that the takeover will go ahead. The only question is whether Northgate will increase its holding to a complete acquisition.
The company will have a combined workforce of 6,000 with revenue of 700m euros ($952m). Northgate’s CEO Chris Stone will continue as head, with Arinso’s CEO Jos Sluys on the board with a focus on developing the European business.
It is Northgate’s largest acquisition to date, though it has made major HR acquisitions before, most notably the reverse takeover of Rebus HR Group in January 2004. Before that it made several smaller HR acquisitions: PWA Group Ltd, and payroll processing services providers Cara Payroll Group and Prolog.
Our View
Jos Sluys has always maintained that he would consider selling his stake in Arinso, but only at the right price. Two years ago he told Computer Business Review that many of the major HR BPO providers had approached him because they wanted to build European capabilities as the market was moving toward global deals at the time, but they were not prepared to pay him what he deemed his stake to be worth.
The HR BPO market has since taken a very public backward step, and some of those vendors who were eyeing up Arinso have had to completely re-evaluate how they will continue. While Sluys always had ambitions for Arinso in the now-receding full-scope HR BPO market, he has developed a strong business in the mid-market and single-process market, especially payroll, and has years of experience in SAP implementations. Two years ago his shares were trading around the 11 euro level, so it would seem he has played his hand shrewdly.
