Interim buys Page in pounds 346m cash deal

Michael Page missed out sharing in a pounds 7m bonanza yesterday after the eponymous executive recruitment agency he founded 20 years ago was sold to Interim Services, a US-based agency, for pounds 346m in cash, 17 times the value of the company only four years ago.

Mr Page bowed out of the headhunter in September 1995, at the age of 50, selling his shares at the time for only about a third of the 557p, including a final dividend of 7p, Interim is paying.

But chief executive Terry Benson, who joined the firm in 1979, and finance director Ian Nash will share pounds 7m between them in shares and options. Mr Benson alone has 900,000 options bought at 2p a share.

The bid price is 55p above the closing price last Friday. A year ago the shares were trading at 186p, two years ago at 113p and four years ago, in the trough of the recession, they bottomed out at 33p.

Recruitment agency shares are enjoying being flavour of the month with City institutions, riding the boom generated by economic recovery, record company profits and soaring City bonuses.

Michael Page, which specialises in junior and senior management placings in the salary range between pounds 20,000 and pounds 100,000 a year, achieved a record profit before tax of pounds 30.4m last year, an increase of 71 per cent.

Earnings per share rose 71 per cent to 31.5p, net cash reserves went up 57 per cent to pounds 41m, and the dividend for the year is up 80 per cent at 9p.

Business boomed in the UK, which accounts for 64 per cent of group profits. Overseas markets also enjoyed a boom, including Netherlands, France, Australia and Hong Kong and only Germany remains a difficult market. The group pushed up operating margins from 16.1 per cent to 20.3 per cent of turnover. In 1991 it was just 3 per cent.

But Mr Benson himself admits that the recruitment business is highly cyclical and the opportunities to expand margins further are limited. Analysts said yesterday Interim had paid a very full price for Page. The cash consideration will take its gearing to more than 100 per cent. Demand for executives has outpaced supply, and the cost of recruiting has begun rising steadily. Michael Page increased its own staff numbers by 30 per cent last year to more than 800. But further growth is still possible, according to analyst Will Wallace at SG Warburg. He has raised his forecast for the current year from pounds 31.5m to pounds 35m.

Michael Page will retain its separate identity and the two executives will remain on one-year rolling contracts on the same terms as before. The two businesses were complementary, Interim's president and chief executive Ray Marcy said yesterday.

The takeover will allow Michael Page to expand into the US market and Interim which specialises in blue-collar recruitment, contract workers and healthcare, to tap the UK market. Michael Page could open in New York by the late summer.

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