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September 29, 2010

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dealmakers

dealmakers: Stephen Roddenberry and Jose GordoThe deal: The Akerman Senterfitt attorneys represented the GEO Group, a Boca Raton-based provider of correctional, detention and residential treatment services in the $730 mil-lion acquisition of Cornell Cos., an operator of 68 correctional and treatment facilities.

The deal closed on Aug. 12.details: GEO Group acquired Cornell for stock and cash at an estimated value of $730 million, including the assumption of about $290 million in Cornell debt, excluding cash.

The merger called for GEO to issue approxi-mately 15.8 million shares in exchange for 80 percent of the outstanding shares of Cornell common stock, and for the remaining 20 per-cent of the outstanding shares of Cornell com-mon stock to receive about $85 million in cash consideration. GEO would end up with about 65 million diluted shares outstanding.

“GEO had talked to Cornell three or four times over the last five or six years, so the main challenge was just crossing the finish line,” Roddenberry said. “The last part took three or four months. It went relatively quickly because the two companies had talked previously and knew each other” so much of the groundwork for the deal had already been laid.

Even so, “this deal was fairly difficult. It’s a large transaction with a difficult financing structure.”

GEO financed the deal by closing on a new $750 million senior credit facility. The facility is comprised of a five-year, $150 million Term Loan A initially bearing interest at the benchmark

A.M. HolT

Akerman Senterfitt attorneys Jose Gordo and Stephen Roddenberry represented GEO in closing a deal that had been discussed for five years, laying the ground-work for what in the end was a “large transaction with a difficult timing structure,” Roddenberry said.

AkeRMAn lAwyeRs Help Geo close $730 million acquisition

This article is reprinted with permission from the Daily Business Review. © 2010

London Interbank Offered Rate, or Libor, plus 2.50 percent; six-year, $200 million Term Loan B initially bearing interest at Libor plus 3.25 percent with a Libor floor of 1.5 percent; and a five-year $400 mil-lion revolving credit facility initially bear-ing interest at Libor plus 2.5 percent.

A Term Loan B differs from an A in that it typically has both a longer maturity and a bullet maturity instead of one that amortizes.

GEO’s new senior credit facility was used to repay borrowings outstanding under GEO’s previous credit facility and TeLoan; fund the cash consideration and transaction-related expenses in connec-tion with the Cornell merger; and repay Cornell’s current senior debt of $180 mil-lion.

With the deal’s closing, GEO’s new term loans are fully funded, and GEO ex-pects to have about $220 million in bor-rowings outstanding, about $50 million in letters of credit, and between $120 million and $130 million in available borrowing capacity under the revolving credit facility.

GEO chairman and chief executive George Zoley said the deal created a stronger company with revenues of ap-proximately $1.5 billion, “enhanced scale, diversification, and complementary ser-vice offerings.”

GEO, whose clients include federal, state, and local government agencies, now manages or owns 119 correctional, detention and residential treatment facilities with a total capacity of ap-proximately 81,000 beds, and eight non-residential service centers with a total capacity of about 1,400 beds.

The company also represents govern-ment agencies in Australia, South Africa, and the United Kingdom.

“In what we call the adult secure business, which is basically prisons, it provides [GEO] additional locations and better customer coverage,” Roddenberry said. “Cornell also had juvenile detention facilities which GEO really was not sig-nificant in, so it gave them a new line of business in that area.”

The transaction makes GEO the fifth-largest provider of correctional facilities

in the world, counting governments. Its size and scope put it in the same league with the U.S. Bureau of Prisons, the California and Texas penal systems and one other private company, Roddenberry said. Background: Roddenberry is a share-holder specializing in corporate compli-ance and governance issues, public and private securities transactions, mergers and acquisitions and private equity in-vestments. Gordo, who is of counsel to Akerman in Miami, has a transactional practice focusing on mergers and acqui-sitions.

Kenneth Alberstadt, a New York-based shareholder, and Akerman associates Larry Ross in Miami and John Lee in New York assisted in the deal.

BofA Merrill Lynch and Barclays Capital acted as GEO’s joint financial advisers. Moelis & Co. acted as Cornell’s exclusive financial adviser. Hogan Lovells served as Cornell’s legal adviser.

—Wayne Tompkins