Iron Mountain purchase of Hays reaching £200m mark

Iron Mountain, the American document storage company, is expected to be victorious in the bid battle for the document management business of Hays, the British business service group.

Insiders have told The Independent on Sunday that its winning bid for Hays’ IMS division could be “approaching pounds 200m”, and substantially more than the highest analyst forecast of pounds 160m.

Iron Mountain, whose European division is half-owned by UK firm Mentmore, is sealing its reputation for aggressive expansion, demonstrated by its sales growth to $1.3bn (pounds 797m) last year from $209m in 1997.

The healthy price will be a welcome lift to Hays, whose core recruitment division has suffered from the effects of the recent economic downturn, particularly in the South-east.

Brambles, the business services firm, was also in the running for the division, and some private equity firms had laid down offers. A second round of bids that came in a few weeks ago showed Iron Mountain was the highest bidder. But at this point Brambles still seemed to have a chance of taking the prize, after concern that the Office of Fair Trading could intervene. Hays has continued talking to both Brambles and Iron Mountain, but last week’s surprise decision by the OFT to allow Iron Mountain to bid without a referral to the Competition Commission has left it yards ahead in the race.

Brambles will hear this week whether the OFT will clear its bid for IMS, although because this raises fewer competition concerns than Iron Mountain’s bid, the OFT is expected to approve.

The last details were being sewn up late on Friday and Saturday, and there is still a chance that Brambles could trump Iron Mountain with a higher offer. But the high price that is now on the table suggests this is unlikely.

Hays is also selling its logistics business, although it is thought to be having more difficulty in finding a generous buyer for this division. The business provides 36 per cent of its sales. The mail division, which is now in direct competition with Royal Mail after winning a long-term licence to deliver mail in the UK, is also on the slab.

In March Hays’ new chief executive, Colin Matthews, announced a strategy to sell the non-core divisions and concentrate on the personnel business.

In doing so he announced the end of the empire founded by Ronnie Frost, the former chairman who spent 30 years transforming Hays from a poultry wholesaler into a large business services company worth more than pounds 8bn in 1999. A series of profit warnings had left some investors in favour of a break-up, although Mr Frost still holds a 4.6 per cent stake in the company.

The new strategy has provided a boost to Hays’ share price in recent months. It has risen by about a third since March, valuing the company at pounds 1.7bn.