• Seek offloading non-core job sites in LatAm, though at a loss
  • RedArbor to strengthen leadership in Brazil, challenge in Mexico
  • Strategically rational deal benefits both companies

Seek, the Australia-based recruitment giant, has called time on Latin America, announcing it will sell its businesses in Brazil and Mexico to recruitment marketplace specialist RedArbor.

RedArbor, which is based in Spain and has the dominant recruitment business across Latin America, will pay $85 million U.S. in cash for Seek’s 98.2% stake in OCC Mundial in Mexico and 100% of Brasil Online, the holding company that operates the job site Catho. It’s a great deal for RedArbor — which is paying a sum equivalent to less than two years of the combined businesses’ annual revenue.

The deal has important ramifications for both Seek and RedArbor:

  • Seek offloads two assets that sit at No. 3 in their respective markets (by monthly visits) and have demonstrated limited capability to challenge market leaders or grow revenue substantially. Particularly with recruitment globally facing difficult economic headwinds, it’s a wise move.
  • The deal demonstrates that Latin America is no longer a core focus for Seek, with the company focusing on its bigger revenue-generating markets — Australia and Asia Pacific.
  • RedArbor will be able to cement its leadership position in Brazil by adding Catho to InfoJobs Brazil, the current No. 1 recruitment marketplace in the country by visits. In Mexico, RedArbor will be able to mount a stronger challenge against market leader Indeed by combining its marketplace mx.CompuTrabajo.com with newly acquired Occ.com.mx. RedArbor is also removing two major competitors in two key markets through the acquisition.

Seek’s sale price comes at a steep discount

The sale price comes at a steep discount — representing just a fraction of the almost $300 million U.S. Seek paid for both businesses over a multiyear period — and reflects the challenging path forward for Catho, in particular, which has been hit by macroeconomic and political instability that led to a sustained period of revenue decline.

The two companies agreed that $20 million U.S. of the $85 million purchase price will be held in escrow until performance targets are met.

The transaction is expected to complete by the end of the month — assuming regulators in Mexico and Brazil approve the deal — and will result in a net loss of AUD$15 million to AUD$35 million for Seek. The funds from the sale will be used to pay down Seek’s debt, which stood at AUD$1.1 billion at the end of last year.

Seek’s share price lifted 4.8% on the Australian stock exchange following the announcement on Wednesday (Australian local time), suggesting investors agree the transaction makes sense.

Prolonged decline for Catho

Catho has been a struggling business for some time. Initially operating on a unique candidate-pays model, the business eventually pivoted to an employer-pays and then a freemium model led by enterprise clients. However, revenue has not seen a strong rebound since the shift. Catho’s FY2023 revenue decreased 3% y-o-y to AUD$29.5 million ($18.6 million U.S.) in the 12 months to June 2023. Parent Seek attributed the decline to the company’s transition from a paid to a freemium business model, but the business has been stale for years. In H1 of FY2024, Catho’s revenue rebounded 8% in constant terms.

OCC Mundial has been more successful, growing revenue by 19% y-o-y in FY2023 to MXN485 million ($27.5 million U.S.). According to Seek, the growth was led by increased digital adoption of recruitment and volumes of ads. In H1 2024, OCC Mundial revenue grew by 5% y-o-y.

It probably helped sweeten the deal with RedArbor to sell a profitable business alongside a loss-making one.

Strong boost for RedArbor

For RedArbor, the deal is inherently led by two factors:  to bulk up existing positions in LatAm’s two largest economies — Brazil and Mexico — and boost revenue in a region where recruitment revenue has inherently been tough to generate.

In 2022, its latest available financials, RedArbor generated €46.3 million ($52 million U.S.) in revenue, y-o-y growth of 49% — this was entirely driven by the LatAm operations, including the regionwide CompuTrabajo brand, InfoJobs Brazil, and various adjacent ATS products.

The deal with Seek will enable RedArbor to double its revenue, assuming the company is able to sustain and grow existing subscriptions and client relationships at both Catho and OCC Mundial.

In Brazil, RedArbor’s recruitment business InfoJobs has built a significant lead as the No. 1, pulling ahead of both Indeed and Catho, with around 17 million monthly visits vs. Indeed at 12 million and Catho at 10 million as of April, according to Similarweb. Catho’s acquisition will give RedArbor an absolute lead over Indeed — the recruitment giant owned by Japan-based Recruit Holdings — in LatAm’s largest economy, while giving it access to key enterprise clients and relationships that Seek has built over the past decade.

In Mexico, Indeed is the dominant No. 1. It saw more than 18 million monthly visits in April, almost double CompuTrabajo’s 9.7 million visits. The acquisition of OCC Mundial, the No. 3 recruitment marketplace in the market by visits with 6.7 million in April, will significantly bulk up RedArbor’s challenge against Indeed — with the two becoming practically level on traffic.

Seek narrows global footprint

Having once presided over a sprawling network of job sites that spanned Australia and New Zealand, China, India, Africa and Latin America, Seek’s global footprint is now confined to Asia and Australia where a “unification project” that brought the backend technology of its Australian and Asian job sites together is expected to deliver AUD$2 billion revenue by 2028.

In the 2023 fiscal year, Seek recorded AUD$1.2 billion in revenue and EBITDA of AUD$546 million. Revenue from the Australian business accounted for 73%, or AUD $871 million, of its total revenue.

“Now with the unified platform, we remain committed to the AUD $2 billion revenue opportunity outlined in our strategy presentation from April 2023,” Seek CEO Ian Narev said during a February earnings call.

The AIM Group reached out to Seek for comment but did not receive a response.

Early international acquisitions

Brasil Online was among Seek’s earliest investments outside Asia and Australia. The company had started to pursue growth internationally after it had penetrated about 80% of the Australian online job classified market by the late 2000s.

“Seek has for some time been looking for opportunities to expand its international footprint in attractive markets,” co-founder and then CEO Andrew Bassat said at the time.

The company first paid $67.5 million U.S. in 2008 for a 30% stake in Brasil Online, which operated the No. 1 and No. 2 recruitment sites in Brazil, Catho Online and Manager Online (eventually the Manager Online brand was absorbed into Catho Online). Tiger Global Management remained Brasil Online’s majority shareholder.

Tiger relationship extended to OCC Mundial

Two years later, Seek extended its relationship with Tiger Global, paying $40 million U.S. for a 40% stake in OCC Mundial.

In 2012, Seek increased its stake in Brasil Online to 51% for an additional $78.8 million U.S. and its stake in OCC Mundial to 57% for $22.5 million U.S.

“Tiger has been a very successful investor in the online space, and we have developed a great working relationship with them through our joint venture [in Brazil],” MD of Seek International Jason Lenga said.

In 2015, Seek moved to 98.2% of OCC Mundial for an undisclosed sum (the company’s founder retains the other 1.8% shareholding). The following year, in 2016, Seek paid another $70 million U.S. for the remaining 49% stake in Brasil Online that it didn’t already own.

But just as soon as the Brasil Online deal was completed, the country entered a brutal recession that saw unemployment reach 14% and interest rates hit a high of 15%. Just as the economy started to recover, the Covid pandemic hit. Catho, which operated a unique candidate-pays business model, never recovered.

Over the next four years, its revenue would more than halve from a 2015 peak of AUD$119 million to AUD$44 million in 2020.

In 2018, Seek booked a $82.4 million U.S. impairment charge against the business. Last year, Catho made an EBITDA loss of AUD$1 million.

It’s fair to say that Catho clung onto the candidate-pays model for too long — it finally pulled the plug in 2021. By that time, new competitors had gained a foothold in the market and job-seekers no longer showed the same willingness to pay to access services.

RedArbor’s rise across LatAm

For Seek, holding on to its LatAm interests would mean mounting a costly challenge versus two regional heavyweights — RedArbor and Indeed. Financially and strategically, it made little sense.

The spearhead of RedArbor’s regional growth has been CompuTrabajo. It operates in 19 LatAm markets and is No. 1 in most of them.

The CompuTrabajo sites have grown traffic substantially during the past year. They reached  more than 80 million visits in January, according to Similarweb, and became the No. 2 recruitment marketplace brand globally by traffic in the AIM Group’s rankings. That’s up significantly, from No. 9 a year earlier.

“At the group level, we are only behind Recruit Holdings by various traffic metrics. And this is mainly driven by the volume that CompuTrabajo brings,” David González Castro, RedArbor founder and CEO, told the AIM Group earlier this year.

RedArbor’s other big brand is InfoJobs Brazil, which it fully acquired in 2022, going from a minority stake to buying the remaining 76.2% from marketplace specialist Adevinta. The acquisition enabled RedArbor to implement its own strategies and push through a rebranding and technology updates.

It’s likely that both Catho and OOC Mundial will eventually be integrated into the respective RedArbor brands.

While RedArbor has been making big strides in traffic growth and digital penetration, LatAm remains a tough market to grow revenue in. Recruiters and small employers have limited budgets. Most recruitment businesses depend heavily on corporate clients, especially multinational foreign businesses.

“Latin America is a younger market than Europe or the U.S., and that has an important change in terms of human resources management,” González Castro said. “The average prices paid in Europe for recruitment services are much higher than in Latin America — as are the average salaries.”

Acquiring Seek’s local recruitment businesses will thus help RedArbor boost revenue and reach, as it continues on its quest to dominate LatAm’s talent-acquisition market.

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