Online jobs marketplace SEEK (ASX: SEK) has walked away from a $41.2 million takeover of Xref (ASX: XF1) after shareholders of the Sydney-based HR and recruitment technology company voted down the offer.

The rejection has led to a swift response by the market, which has written down the value of Xref to about $23 million – or almost half the value that SEEK had placed on the business.   

The rejection by Xref shareholders at a meeting held yesterday was in defiance of a unanimous board recommendation to accept SEEK’s bid to acquire all of the company's shares on issue for 21.8c each.

Just 67.6 per cent of votes were cast in favour of the offer, which fell short of the 75 per cent required.

After falling 24 per cent in the aftermath of yesterday’s vote, Xref shares lost another 25.8 per cent this morning to hit a low of 11.5c.

SEEK, which went into yesterday’s shareholder meeting with its “best and final” offer for Xref, says it has terminated the scheme implementation deed, ending months of negotiations with Xref – a company with which SEEK has been officially collaborating since early last year.

SEEK has today made it clear that it does not plan to revisit a buyout of Xref, although the company still plans to continue pursuing other opportunities involving the business which specialises in reference and pre-employment checks, employee engagement and exit surveys.

Xref and SEEK announced a collaboration in January last year which involved the integration of Xref’s systems with SEEK’s credential verification platform SEEK Pass, formerly known as Certsy.

In the wake of the pushback by Xref shareholders, the companies have agreed to terminate takeover discussions.

“Accordingly SEEK will continue to explore other opportunities to grow placements, grow yield and improve operating leverage, which may include alternative approaches to achieving the benefits that the scheme would have provided,” says SEEK.

The takeover offer from SEEK stemmed from a strategic review announced by Xref in May last year in the wake of interest the company received from private equity groups to acquire the business.

The review was triggered by challenging market conditions that led to the company posting a bottom-line loss of $5.49 million in FY24, an expansion of the $3.65 million loss recorded a year earlier.

However, after culling about 25 per cent of its workforce the third quarter of FY24, the company reported positive EBITDA in the second half and a small operating cash flow surplus.

In November, Xref chairman Thomas Stianos noted that FY24 was “a significant year for product innovation and business transformation” as the company progressed its migration of clients to its Software as a Service (SaaS) subscriptions which have grown “from zero 18 months ago to more than 60 per cent of our revenue today”.

The Xref board today dusted off the shareholder rejection of SEEK’s offer with plans to focus on its strategy outlined last year.

“Xref will continue to execute its growth strategy as an independent business and will release a business update in the coming days,” says the company.

Xref shares were trading at 12c, down 3.5c, at 10.51am (AEDT).

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