Adecco SA in talks to take over part of Olsten Corp.
By KAREN PIHL-CAREY
HHBR Staff Writer
A part of Olsten Corp. (Melville, NY) may be sold to Lausanne, Switzerland-based Adecco SA, one of the largest temporary service corporations in the world.
Olsten officials confirmed last week that they are in talks with a third party "relative to a possible significant corporate transaction." Olsten did not name the company, but analysts suspected it was Adecco, and the Wall Street Journal reported Friday that it was indeed the Swiss company, according to "people familiar with the matter."
Analysts had debated over which section of Olsten was up for sale, but some believed it was the temporary-help arm of the 49-year-old company. A deal with that part of Olsten could be valued at nearly $950 million, plus assumption of part of the company’s $650 million in debt, analyst Matthew Roswell of Legg Mason (Baltimore) told the Journal. Olsten’s home healthcare operation would be valued at $250 million, but it is unlikely that a buyer would be interested, Roswell said.
"I can’t think of any buyers for Olsten’s home care unit," he told Newsday. "It’s the company’s problem child. If Olsten sold the home care unit, they wouldn’t get full value."
Analyst Kevin Dyches of Prudential Securities (Kansas City, MO) initially thought that Adecco was considering buying Olsten in its entirety. Even though Olsten had recently lost money and the home care unit was struggling, Dyches believed a potential for future profitability made it attractive, reported Newsday. If Adecco purchased Olsten, Dyches expected it would go for $12 to $15 a share more than double the company’s average stock price of $7.25 over the past year.
News of the possible takeover has greatly affected Olsten stock, which jumped to $10.938 Thursday on the New York Stock Exchange for a 52-week intraday high. It closed that day at $10.875. When the Journal reported on Friday that Adecco was interested in acquiring only a portion of Olsten, the shares dropped to $9.938 on volume of about one million, triple the daily average.
Both Olsten and Adecco officials have kept mum about what exactly is transpiring. Adecco has not even officially announced that it is discussing a corporate transaction with Olsten. Olsten spokeswoman Nancy Macenko said it could be "a matter of days" before Olsten releases information about a deal.
In a statement last Wednesday, Olsten said that "there was no assurance that any agreement would be reached, or that a transaction would occur." It declined to give more information citing "confidentiality obligations."
Olsten agreed earlier this year to pay the federal government $61 million in cash to settle a Medicare fraud investigation. The agreement included a guilty plea from Olsten’s subsidiary, Kimberly Home Health Care. Investigators had said that Olsten sold several Florida home health agencies to Columbia/HCA Healthcare Corp. (Nashville, TN) for an amount far below their worth, then charged inflated management fees and billed them to Medicare. Medicare pays for management fees, but not acquisition costs.
As a result of the settlement and a restructuring, Olsten reported a 1Q99 loss of $62.3 million, 77 cents per share, which included a $70 million, 86 cents per share, charge.
But the company now appears ready to report profits or break even, Dyches told Dow Jones Business News last week. "The Olsten family wants to see a return on their money," he said.
Today, Olsten reported a 2Q99 ended July 4 net income of $13.5 million, 17 cents per share, compared to a net loss in 2Q98 of $33.5 million, 41 cents per share. Revenues were $1.25 billion, compared to $1.13 billion in 2Q98.
The company also said that talks are continuing with a "third party." Adecco told Reuters on Thursday that it planned to announce a takeover today, but it would not identify Olsten as the target.
You have reached your article limit for the month. Subscribe now to access this article plus other member-only content.
- Award-winning Medical Content
- Latest Advances & Development in Medicine
- Unbiased Content