First Advantage Corporation Signs Definitive Agreement to Purchase First American's Credit Information Group
May 25, 2005
ST. PETERSBURG, Fla., /PRNewswire-FirstCall/ -- First Advantage Corporation (Nasdaq: FADV) and The First American Corporation (NYSE: FAF) today jointly announced the execution of a definitive agreement whereby First Advantage, a risk mitigation and business solutions provider, will acquire the Credit Information Group (CIG) of The First American Corporation, the nation's largest data provider and First Advantage's largest shareholder, in an all-stock transaction. First American and First Advantage originally announced the letter of intent for the transaction on March 22, 2005. The definitive agreements have been approved by the board of directors of each of First American and First Advantage, including by a committee of the independent directors of First Advantage. Morgan Stanley & Co., Incorporated served as the financial advisor to the committee of independent directors of First Advantage and delivered a fairness opinion to the independent committee. Lehman Brothers, Inc. served as the financial advisor to First American and delivered a fairness opinion to its board of directors.
Parker S. Kennedy, chairman and chief executive officer of The First American Corporation and chairman of First Advantage Corporation said: "We are firmly committed to maximizing value for shareholders of both First American and First Advantage. Between our two companies, nearly all forms of business information are available. First American will concentrate on real estate information and First Advantage will cover the other forms of business information. This is a great move for both companies as credit information is a natural fit with the other background screening services offered by First Advantage. First American customers will continue to benefit from a close partnership between our companies, and First Advantage will gain scale and product strength to continue its dynamic growth.
"In addition to creating a more powerful business, this combination will highlight and crystallize the value of our credit segment by combining it with other operations where there are natural synergies and the opportunity for a higher valuation. After the transaction is completed, First Advantage will have in excess of a $1 billion market cap based on today's First Advantage share value. We are confident that as the markets come to understand the true value of the pieces of our companies, the share values of FAF and FADV will continue to climb. The combination of our credit segment and First Advantage is a big step in this direction."
Under the terms of the agreement, The First American Corporation and its First American Real Estate Solutions (FARES) joint venture will contribute their mortgage, automotive, consumer and sub-prime credit businesses to First Advantage in exchange for 27,804,878 shares of First Advantage Class B common stock, valued at $570 million, based upon the agreed upon stock price of $20.50 per share. First Advantage will also issue 975,610 Class B shares to First American in a $20 million debt-to-equity conversion. An additional 1,268,292 shares of First Advantage Class B common stock (valued at $26 million) may be issued to First American in connection with a prospective CIG acquisition.
Expected to close in the third quarter of 2005, the transaction is subject to majority approval by First Advantage's disinterested Class A shareholders and other customary closing conditions. When completed, First Advantage's acquisition of CIG will increase First American's ownership interest in First Advantage from its current position of 67 percent to approximately 80 percent.
First American's Credit Information Group reported pre-tax operating earnings of $18.9 million for the three months ended March 31, 2005. Based on these results and continued strength during the second quarter, First Advantage now estimates that, on an annualized pro-forma basis, the transaction will be accretive to its 2005 earnings by 15 to 20 cents per share before one-time acquisition-related expenses. First Advantage estimates acquisition costs in connection with the CIG transaction in the quarter ended June 30, 2005, of approximately $3 million. Separately, First Advantage has accelerated the consolidation of its existing facilities into its new corporate headquarters in St. Petersburg, Fla., and has closed an office in Milwaukee. This will result in an estimated liability for existing lease obligations, net of estimated sublease rentals, of approximately $2 million. The acquisition costs and the liability for the existing leases will be reflected in First Advantage's results of operations for the quarter ended June 30, 2005.
Source: First America Corporation
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