First Advantage Signs Letter Of Intent To Acquire First American Credit Information Group
March 23, 2005
SANTA ANA, Calif., -- First Advantage Corporation (NASDAQ: FADV) and The First American Corporation (NYSE: FAF) today jointly announced the execution of a nonbinding letter of intent 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, in an all-stock transaction. First American currently owns 69 percent of First Advantage. Included within this segment are First American’s mortgage, automotive, consumer and subprime credit businesses. While the transaction will have no material impact on First American’s operating earnings, it is expected to be immediately accretive to First Advantage’s earnings by 6 cents per diluted share including 4 cents per diluted share of acquisition costs related to this transaction in 2005.
According to the signed letter of intent, The First American Corporation and its First American Real Estate Solutions (FARES) joint venture will receive 26,829,268 shares of First Advantage Class B common stock, valued at $550 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 2,243,902 shares of First Advantage Class B common stock (valued at $46 million dollars) may be issued to First American and FARES as consideration for two pending CIG acquisitions. When completed, the acquisition will increase First American’s economic ownership interest in First Advantage from 69 percent to approximately 80 percent.
First Advantage’s board of directors has formed a special committee comprised of independent directors and has retained Morgan Stanley as financial advisor with respect to this transaction. The transaction is subject to approval of the independent committee, majority approval by First Advantage’s disinterested Class A shareholders, receipt of a fairness opinion and other customary closing conditions. The special committee is reviewing this transaction and will give its recommendation prior to the signing of a definitive agreement.
The acquisition of the highly complementary credit-related services of CIG will further First Advantage’s position as a leading business information and services provider by adding significant scale and creating a unique combination of data ownership, access and distribution. Today, First Advantage provides a suite of services to assist businesses nationwide with information to minimize risks undertaken when employing, leasing, underwriting, contracting and investing in people. Employment background checks, substance abuse testing, tax incentives and credits, resident screening, motor vehicle record reporting and investigative services are some of the major service lines offered to 45,000 clients nationwide. First Advantage is a leader in all of its key business lines, which, following the transaction closing, will expand to include the mortgage/home equity credit, automotive finance and direct-to-consumer credit markets currently dominated by First American’s Credit Information Group.
“We are very excited by the opportunities an acquisition of this magnitude creates for First Advantage,” said John Long, chief executive officer of First Advantage Corporation. “The company emerging from this acquisition will have a market capitalization of over $1 billion, approximately $600 million in annual revenue and strong earnings. This will better position First Advantage for exponential growth, not only organically—thanks to new markets and cross- selling opportunities—but also strategically since we will have the ability to now pursue larger acquisition targets as we continue executing our growth strategy.”
Parker S. Kennedy, chief executive officer of The First American Corporation and chairman of the board for First Advantage Corporation said: “First American’s ongoing commitment to maximizing shareholder value was the catalyst behind this transaction with First Advantage. This is a great move for both companies as it allows First American to focus our growth in the real estate information business, while continuing to benefit from FADV’s growth in the consumer credit and business information services. First American customers will continue to benefit from a close partnership between our companies, and First Advantage is better positioned to capitalize on its growth opportunities.”
Following the close of the transaction, which is anticipated to take place by the third quarter of 2005, the executive management team at First Advantage will be bolstered with the addition of the senior management team of CIG. In particular, Anand Nallathambi, current president of First American’s Credit Information Group, will become the president of First Advantage. The balance of the First Advantage executive management team will remain as it was prior to the closing of the transaction.
Source: The First American Corporation
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