UPDATE: Adecco Expands Into China As Long-Term Play
December 03 2010 - 7:26AM
Dow Jones News
Swiss staffing company Adecco SA's (ADEN.VX) new Chinese joint
venture is part of the company's increased focus on emerging
markets and shows how personnel firms are expanding into the
country's giant labor market.
Adecco announced Friday it will expand its presence in China
through a joint venture with staffing company Foreign Enterprise
Human Resources Service Co. Ltd., or Fesco.
Adecco will hold 49% of the business, which will be based in
Shanghai and named Fesco Adecco, while Fesco will hold the
remaining 51%. The business starts operations on Jan. 1, 2011.
Adecco has been present in China since 1995, but until now has
had a minor presence in the country, a spokesman told Dow Jones
Newswires. He declined to reveal how much Adecco paid for its
stake.
"This is an important step forward for Adecco in China and
underlines our strategic focus on the rapidly growing emerging
markets," said Patrick De Maeseneire, Adecco chief executive, in a
statement.
Only 6% of Adecco's third-quarter revenue came from emerging
markets, which include China.
At EUR330 million, revenue from emerging markets in the third
quarter grew 26% compared with a year earlier.
Key to Adecco's decision is the growth potential of China by
offering services to multinational companies expanding into the
country and for Chinese customers, De Maeseneire added.
The Chinese economy grew at a rate of 9.6% in the third quarter,
while the country created 9.31 million new jobs in urban areas in
the January to September period, surpassing the country's full-year
target of 9 million jobs.
Although earnings potential is limited at present by low wages,
costs are also lower in the country than in Europe, analysts
said.
Earnings could also increase as multinational companies
operating in China increase their efforts to attract and retain
in-demand skills as the country's rapid economic growth fuels a
talent war between foreign and Chinese companies.
Other staffing companies also are increasing their exposure to
China. Randstad Holding NV (RAND.AE) said in October that its China
business showed solid growth in its third quarter, while revenue in
its rest of the world area increasing by 72%.
Board member of Randstad Holding Brian Wilkinson, responsible
for Asia, among others, stated in a recent interview with Dow Jones
that "the biggest challenge facing Randstad Holding in Asia is
keeping up with the region's economic growth."
Fesco already has over 100,000 associates on assignment, and has
access to a network of more than 100 branches throughout China with
a large and established local and multinational client base, Adecco
said.
Fesco Adecco mainly will provide clients with general staffing,
professional staffing and outsourcing services including the
management of payroll and benefits administration, with scope to
expand its offering.
The joint venture is the first cooperation between these two
companies and could lead to further cooperation, the companies
said.
President of Fesco Shanghai, Ni Ying, said: "The joint venture
will not only introduce the latest managerial concepts and exchange
platforms for Fesco, but also help Fesco attract and expand its
international client base within China."
Analysts welcomed the move by Adecco, saying it was a long-term
move for the company.
"It is, strategically, a sound move. this is a move for the
future," said Helvea analyst Chris Burger.
At 1030 GMT, Adecco's shares traded up 1.85 Swiss francs, or
3.1% at CHF61.45, while the benchmark SMI index traded down 0.16%.
The shares have gained 2% this year.
-By John Revill, Dow Jones Newswires; +41 43 443 8042;
john.revill@dowjones.com
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