HRnetGroup plans China expansion via tie-up

Recruitment firm HRnetGroup plans to invest in a joint venture to boost its expansion into China.

The firm has signed a binding term sheet with various individuals and the shareholders of REForce (Shanghai) Human Resources Management Consulting and their affiliates to buy 51 per cent of REForce, it announced yesterday.

The purchase will be made in cash. The final price will be determined by the net profit of REForce for the fiscal years ended Dec 31, 2017, 2018 and 2019, as well as a "tiered price-earnings multiple". The net profit for the financial year ended 2017 will represent 10 per cent of the total price, while the net profit for 2018 and 2019 will make up 45 per cent each of the final price.

HRnetGroup will extend a three million yuan (S$614,410) shareholder loan to REForce for operation and expansion purposes.

If REForce does not meet the net profit target for two consecutive years, HRnetGroup can end the acquisition and have relevant REForce shareholders buy out HRnetGroup from REForce, as per the term sheet.

While REForce needs to hit an minimum agreed level of net profit, HRnetGroup has allowed for a "variance" of less than 5 per cent. The profit target amount was not disclosed.

HRnetGroup was listed in 2017. Its third-quarter net profit rose 20.2 per cent to $10.7 million on a drop in minority interests and growth in the flexible staffing business.Revenue grew 7 per cent to $97.5 million.

HRnetGroup shares closed down 1.5 cents at 83 cents yesterday.

A version of this article appeared in the print edition of The Straits Times on January 12, 2018, with the headline 'HRnetGroup plans China expansion via tie-up'. Subscribe