On Jul. 14 GEO Group Inc. of Boca Raton, FL, announced that it was buying Correctional Services Corp, the owner and operator of the immigration prison on the Tacoma Tideflats known as the Northwest Detention Center, which has often been a subject of commentary on the UFPPC web site. -- The share price of CSCQ, which stood at about $3.25 on Monday morning, rose immediately to $5.75 in trading Thursday morning; no doubt some people made quite a killing. -- AP reported that "GEO said it was 'optimistic' it would soon reach an agreement to sell the business to James F. Slattery, Correctional Services' chief executive, but would seek other buyers if a deal could not be reached." -- The transaction has been approved by the boards of both companies. -- Reuters specified that the aforementioned sale to Slattery would involve only "the juvenile business." -- The South Florida Business Journal reported that Geo became an independent company in 2003 and "has been exploring acquisition opportunities since." -- BNP Paribas played a key role in financing the $62-million deal.[2,3,4,5] -- For more on the dubious history of the Northwest Detention Center, enter "Correctional Services" into the search function of the UFPPC web site. -- From the earliest indication that the now soon-to-be-defunct Correctional Services Corp. wanted to exploit the business opportunity it saw in an immigration prison on the Tacoma Tideflats, the poor record and controversial nature of the company was clear. -- Yet during the years that the project was hatched and realized, there was a virtual blackout on news about the Florida corporation in the newspapers of Western Washington, to say nothing of news of the gathering national and international movement opposing prison privatization on moral and public policy grounds. -- Local residents were continually misled about the nature and size of the facility that now stands at 1623 E. "J" St. in the Port of Tacoma, a site located in a volcanic danger zone upon an industrial site laced with toxic chemicals. -- The efforts of Correctional Services to evade the Davis-Bacon act went unreported. -- The company ignored requests for information, citing the "private" nature of the corporation, despite the fact that imprisoning individuals in the name of the United States of America is something that is done in our names and on our behalf as citizens. -- There can, moreover, be no doubt that it was or should have been known to government officials here in Tacoma that Correctional Service Corporation's record was poor seven months before Councilmember Kevin Phelps, who has just left the Tacoma City Council as a result of circumstances that have not been fully reported, introduced Resolution No. 34,722 of the Tacoma City Council. -- Yet the Council adopted his resolution, stating that "CSC has an excellent reputation in the communities where it has facilities" -- never a believable proposition. -- We were told, by Sen. Patty Murray, no less, that "Tacoma's economy will get a boost and jobs will be created during the construction and operation of this new facility," but there has been no such "boost." -- Tacomans deserve to hear both from their civic leaders about the effects of the sale of Correctional Services, and the News Tribune (Tacoma, WA) should take the opportunity to make amends for its shoddy, inadequate reporting on the facility to date....
SARASOTA PRISON MANAGEMENT COMPANY BEING BOUGHT BY BOCA RATON'S GEO GROUP
Herald-Tribune (Sarasota, Florida)
July 14, 2005
Correctional Services Corp., the Sarasota-based prison management company, is being bought by Boca Ratons GEO Group Inc. for $6 per share.
That is a 37 percent premium based on the Sarasota companys closing price of $4.39 per share on Wednesday. The all-cash deal works out to $62 million price for Correctional Services.
GEO Group, which also manages prisons and mental health operations, also will assume $124 million in Correctional Services debt and said that it plans to divest the Sarasota companys juvenile services division, which has been problematic for the prison manager.
GEO GROUP ACQUIRES CORRECTIONAL SERVICES
July 14, 2005
GEO Group Inc., one of the nation's largest prison operators, on Thursday said it agreed to acquire rival Correctional Services Corp. for $62 million in cash, plus the assumption of $124 million in debt.
The company also backed its previous second-quarter earnings and revenue forecast.
GEO said it would pay $6 in cash for each share of Correctional Services, which manages 32 correctional and detention facilities for adults and juveniles throughout the country. The offer price represents a premium of nearly 37 percent over Correctional Services' Wednesday closing price.
Shares of Correctional Services shot up $1.36, or 31 percent, to $5.75 on the Nasdaq, where it was among the biggest percentage gainers in morning trading. GEO shares slipped a penny to $25.30 on the New York Stock Exchange.
As part of the deal, GEO plans to sell Correctional Services' juvenile services division, which it said is outside the company's core business. GEO said it was "optimistic" it would soon reach an agreement to sell the business to James F. Slattery, Correctional Services' chief executive, but would seek other buyers if a deal could not be reached.
Once GEO closes the acquisition of Sarasota, Fla.-based Correctional Services and sells the juvenile business, it will have 55 facilities with a capacity of roughly 43,500 beds. The company now manages 41 facilities with a capacity of about 36,000 beds in the United States, Australia, South Africa and New Zealand.
GEO said it would fund the acquisition through current cash holdings of $42 million and a $175 million bank loan underwritten by BNP Paribas. The transaction, which has been approved by the boards of both companies, is expected to close in this year's fourth quarter, pending shareholder and regulatory approval.
GEO reaffirmed its second-quarter earnings forecast of 40 cents to 42 cents per share, on revenue of $148 million to $154 million. The forecast includes a gain of 17 cents per share from repatriating overseas earnings from last year's fourth quarter.
Wall Street's consensus forecast for the quarter is 24 cents per share, the mean view of four analysts surveyed by Thomson Financial. Analysts' forecasts usually exclude one-time charges and gains.
For the full year, GEO projects earnings of $1.38 to $1.46 per share, on revenue of $582 million to $602 million. If the acquisition is completed as expected by the fourth quarter, full-year earnings should range from $1.26 to $1.34 per share, on revenue of $609 million to $629 million, GEO said.
Analysts' average forecast for 2005 is currently $1.45 per share, according to Thomson Financial, on revenue of $599.01 million.
For next year, GEO forecast earnings of $1.76 to $1.88 per share, on revenue ranging between $630 million and $650 million on a standalone basis. Including the acquisition, earnings are expected to range from $2.03 to $2.15 per share.
Wall Street's mean 2006 estimate is $1.90 per share, on projected revenue of $646.26 million, according to Thomson Financial.
GEO GROUP TO ACQUIRE CORRECTIONAL SERVICES
July 14, 2005
NEW YORK -- Prison operator GEO Group Inc. said on Thursday, that it has agreed to acquire Correctional Services Corp. for about $62 million, or $6 per share, in an all-cash deal.
GEO would assume about $124 million in Correctional Services debt and plans to divest Correctional's juvenile services division following the close of the acquisition.
GEO also forecast full year 2005 earnings in the range of $1.26 per share to $1.34 per share assuming completion of the acquisition in the beginning of the fourth quarter.
The company said the deal is expected to be approximately 15 percent accretive in 2006 and that Correctional would add $95 to $105 million in revenue in 2006. For 2006, the company forecast earnings in the range of $2.03 to $2.15 per share, excluding costs of a prison expansion in Florence, Arizona.
GEO plans to finance the acquisition through the use of $42 million in cash, and to supplement that with a senior credit facility of $175 million, underwritten by BNP Paribas.
GEO also said it was in talks with Correctional's chief executive James Slattery, to sell him the juvenile business, and that it was optimistic a deal could be reached in the near future.
Shares of Correctional jumped more than 30 percent or $1.46 to an all-time high of $5.85 in early morning trading on the Nasdaq on Thursday. Shares of Geo Group were off 1 cent at $25.30.
Lehman Brothers advised GEO on the deal, while Jefferies & Co. advised Correctional.
GEO TO BUY CORRECTIONAL SERVICES CORP.
South Florida Business Journal
July 14, 2005
In a $62 million deal, two Florida-based correctional services firm are to combine -- the Geo Group and Correctional Services Corp.
Boca Raton-based Geo (NYSE: GGI) said it has agreed to buy Sarasota-based CSC (NASDAQ: CSCQ) for $6 cash a common share.
The agreement, approved by both companies' boards, also calls for Geo to assume $124 million of CSC debt.
The companies have targeted closing, subject to the approval from CSC shareholders, regulators and other conditions, for the beginning of the fourth quarter. That would be just after Geo could potentially lose a contract in Michigan.
CSC develops and manages privatized correctional and detention facilities. It has contracts and awards to operate 15 adult correctional facilities with a design capacity of about 7,500 beds.
The company also provides juvenile programs for adjudicated youths at 17 facilities with an capacity of about 1,300 beds through its Youth Services International subsidiary.
Geo said it plans to divest CSC's juvenile services division after the purchase closes.
"Although Geo believes that the future growth prospects of the juvenile business are positive, the business is outside of Geo's core focus," the company said.
Geo said it has entered into discussions with James F. Slattery, CSC chief executive officer, to sell the business to him.
Once the acquisition closes and Geo sells the juvenile business, the company said it will have 55 facilities with a total design capacity of about 43,500 beds.
George C. Zoley, Geo chairman and chief executive officer, said his company has been exploring acquisition opportunities since it became an independent company in July 2003.
"We are . . . excited about the community correctional services offered by CSC, which will broaden our service offerings and expand our relationships with existing clients," he said. "Furthermore, our existing regional operating structure will enable us to integrate CSC's facilities on a cost-efficient basis."
Assuming the acquisition is complete in the beginning of the fourth quarter, Zoley said Geo expects to fully integrate CSC's operations by year end."
Geo said it plans to finance the buy through $42 million in cash, supplemented by a $175 million senior credit facility underwritten by BNP Paribas.
Financially, Geo predicted a $2 million, or 12 cents a share, write off in the third quarter for deferred financing costs. The next quarter, the company predicted the impact of CSC's operations to be neutral to earnings.
Shares were up 6 cents to $25.37. The 52-week high was $32.70 on Feb. 8. The 52-week low was $17.02 on July 26.
CHANGES COMING TO CORRECTIONAL SERVICES AFTER ACQUISITION
Tampa Bay Business Journal
July 14, 2005
The GEO Group has agreed to buy Correctional Services Corp. for $62 million in cash and to assume $124 million in debt.
Shareholders of Correctional Services (NASDAQ: CSCQ), a Sarasota-based developer and manager of privatized correctional and detention facilities, will receive $6 a share in cash. The deal is expected to close at the beginning of the fourth quarter.
In a release, GEO Group said it plans to divest Correctional Services' juvenile services division and is negotiating with James Slattery, CEO of Correctional Services, to sell that part of the business to Slattery. GEO said it believes the future growth prospects of the juvenile business are positive, but the business is outside of GEO's core focus. GEO said it would seek alternative buyers if it cannot reach a deal with Slattery.
GEO said it plans to finance the acquisition of Correctional Services using $42 million in cash and supplement that with funds drawn on a senior credit facility underwritten by BNP Paribas for $175 million.
GEO Group (NYSE: GGI) is a Boca Raton-based provider of correctional and detention management and other services to government agencies. After the deal closes, GEO will have 55 facilities with a total design capacity of about 43,500 beds.
Jefferies & Co. Inc. served as financial advisor and Epstein Becker & Green PC was legal counsel to Correctional Services.
Lehman Brothers acted as GEO's financial advisor and provided a fairness opinion to the board. Akerman Senterfitt was GEO's legal advisor.
CORRECTIONAL SERVICES CORPORATION ENTERS AGREEMENT TO BE ACQUIRED BY THE GEO GROUP, INC.
July 14, 2005
SARASOTA, Fla. -- Correctional Services Corporation (NASDAQ:CSCQ) today announced the signing of a definitive merger agreement by which CSC will be acquired by The GEO Group, Inc. (NYSE:GGI).
Under the terms of the definitive agreement approved by the boards of directors of both GEO and CSC, GEO will acquire all outstanding shares of CSC, with CSC stockholders receiving $6.00 in cash per common share, or approximately $62 million in the aggregate, and GEO will assume approximately $124 million in CSC debt. The closing of the acquisition, which is subject to the approval of CSC's stockholders and federal regulatory agencies as well as to other customary conditions, is targeted for the beginning of the fourth quarter of 2005.
James Slattery, President and Chief Executive Officer of CSC, commented, "We appreciate the long-term support of our stockholders and are pleased with this opportunity to realize enhanced stockholder value at $6.00 per share."
Stuart Gerson, Chairman of the Board of Directors of CSC, added, "The Special Committee of CSC's Board of Directors worked very hard to realize value for the company's stockholders at a level that did not appear attainable by CSC in the near term."
Jefferies & Company, Inc. served as financial advisor to CSC and Epstein Becker & Green, P.C. served as legal counsel to CSC.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
Certain statements contained in this press release are not historical but are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These include statements regarding the expectations, beliefs, intentions or strategies regarding the future. The Company intends that all forward-looking statements be subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect the Company's views as of the date they are made with respect to future events and financial performance, but are subject to many uncertainties and risks which could cause the actual results of the Company to differ materially from any future results expressed or implied by such forward-looking statements. Examples of such uncertainties and risks include, but are not limited to: GEO's ability to consummate the acquisition; fluctuations in occupancy levels and labor costs; the ability to secure both new contracts and the renewal of existing contracts; the possibility of unforeseen costs relating to facility closings, the ability to achieve profitability and public resistance to privatization; ability to obtain construction financing; and ability to complete new construction projects within budgeted amounts. Additional risk factors include those discussed in reports filed by the Company from time to time on Forms 10-K, 10-Q and 8-K. The Company does not undertake any obligation to update any forward-looking statements.