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Online jobs marketplace SEEK (ASX: SEK) has set its sights on snapping up Sydney-based HR and recruitment technology company Xref (ASX: XF1) for $41.2 million, in a deal that will cement a partnership forged by the companies earlier this year.
SEEK has secured an exclusivity deed with Xref after putting forward an indicative proposal to acquire all shares in the company for 21.81 cents per share (cps).
The news sent shares in Xref, which has more than 1.3 million users across 195 countries, soaring more than 55 per cent to 21cps.
Xref, which specialises in reference and pre-employment checks, employee engagement and exit surveys, has been working with SEEK since June this year after securing a partnership to improve the way reference checks are used in the employment process.
“After careful consideration of the indicative proposal, the Xref board unanimously determined that it is in the best interests of Xref shareholders to progress the indicative proposal in order for SEEK to provide a binding proposal to the Xref board,” says the company.
Xref says its directors plan to unanimously recommend that shareholders vote in favour of the proposed buyout at the cash offer price of 21.81c per share should a binding proposal eventuate.
“The intended recommendation will be subject to no superior offer being received and an independent expert concluding (and continuing to conclude) that the proposed transaction is in the best interests of Xref shareholders,” says Xref.
Under the terms of the exclusivity agreement, SEEK has four weeks to put forward a binding agreement for Xref.
The two companies first announced their planned collaboration in January this year, which involved the integration of Xref’s systems with SEEK’s credential verification platform SEEK Pass, formerly known as Certsy.
The integration, which was implemented in June, initially allowed employers using SEEK to request reference checks provided by Xref via SEEK Pass with future phases of the integration prepared to explore other uses of reference checks, such as verifying work history.
In May this year, Xref undertook a strategic review of its business after revealing that it had received enquiries “from a number of parties regarding a potential acquisition of the company”. Several of these inquiries have been from private equity firms.
“Subsequent to this announcement, Xref undertook a period of engagement and preliminary commercial due diligence with interested parties, including SEEK, following which SEEK submitted the indicative proposal which was conditional on an exclusivity regime,” says the company.
The strategic review followed a challenging year for Xref which posted a net loss of $5.6 million in FY24, a 69 per cent deterioration of its FY23 result, as revenue dipped 3 per cent to $19.86 million.
Xref booked $2.9 million in depreciation and amortisation costs for the year, but the result also saw net cash from operations dip into negative territory with the business bleeding almost $679,000 during the year.
Xref says it will continue to keep the market informed of any material developments for the proposed offer while complying with the “shop talk” restrictions of the exclusivity deed.
However, the company notes that there is “no certainty that the indicative proposal will result in a binding transaction being put forward to shareholders”.
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