Geo Group to purchase Cornell Cos. for approximately $385 million

Geo Group to buy Cornell for about $385 million

BOCA RATON, Fla. — Geo Group Inc. said Monday that it will buy Cornell Cos. for approximately $385 million to meet increased demand for correctional, detention and residential treatment facilities and services.

The deal also includes about $300 million in debt. The acquisition is valued at approximately $24.96 per Cornell share, a 35 percent premium over the company’s Friday closing stock price of $18.47.

The transaction gives Cornell shareholders the option to receive either 1.3 shares of Geo stock for each Cornell share they own; or a cash amount equal to the greater of the fair market value of one share of Geo stock plus $6 or the fair market value of 1.3 shares of Geo stock.

No more than 20 percent of Cornell’s outstanding stock can be exchanged for the cash component in order to maintain the deal’s tax-deferred treatment.

The combined company will have revenue of about $1.5 billion and manage or own 97 correctional and detention facilities and 32 behavioral health facilities. The deal is expected to save Geo $12 million to $15 million annually and add to its pro forma 2011 earnings per share.

Cornell’s adult secure and adult community-based units will be folded into Geo’s U.S. corrections division. Cornell’s behavioral health unit, Abraxas youth and family services, will join Geo Care’s behavioral health care services division.

Both Geo and Cornell maintained their first-quarter profit forecasts. Geo still expects earnings between 32 cents and 34 cents per share, while Cornell anticipates a profit of 18 cents to 22 cents per share for the quarter.

Analysts surveyed by Thomson Reuters, whose estimates typically remove one-time items, predict first-quarter earnings of 33 cents per share for Geo and a profit of 22 cents per share for Cornell.

The acquisition is expected to close in the third quarter. Both companies’ boards have approved the transaction, but it still needs approval from Cornell’s shareholders and Geo stockholders must approve the issuance of some of the company’s shares.