First Advantage Corporation (NASDAQ:FA), a leading provider of
employment background screening, identity, and verification
solutions, announced today that it has entered into a definitive
purchase agreement to acquire Sterling Check Corp. (NASDAQ:STER), a
provider of background screening and identity services. First
Advantage will issue a combination of cash and stock valuing
Sterling at approximately $2.2 billion, including Sterling’s
outstanding debt.
First Advantage and Sterling offer complementary technology
solutions and services that enable employers across healthcare,
retail & e-commerce, transportation, manufacturing, financial
services, and other industries to manage risk and hire the best
talent. Customers will benefit from accelerated investment in
innovation and access to a broader suite of products and solutions
to meet their needs, fueling growth of the combined company.
Building on pro forma combined revenue of $1.5 billion for the
year ended December 31, 2023, the transaction is expected to
deliver at least $50 million in run-rate synergies, implying
immediate double-digit EPS accretion on a run-rate synergy basis.
The combined company will have greater diversification of revenue
across customer segments, industries, and geographies, reducing
seasonality and improving resource planning and operational
efficiency.
Following the transaction, we expect First Advantage to continue
compounding EPS at a teens growth rate over time through a
combination of topline growth, ongoing synergy capture, and
significant deleveraging via strong organic free cash flow
generation. First Advantage will share additional forward-looking
financial information regarding the transaction’s impact at or
around the time of closing.
“We are thrilled to announce the acquisition of Sterling,
demonstrating our commitment to delivering high-quality,
cost-effective employment background screening and identity
verification solutions that enhance value for customers by helping
them hire smarter and onboard faster, while also positioning First
Advantage for long-term value creation,” said Scott Staples, Chief
Executive Officer of First Advantage. “This combination unlocks
efficiencies and opportunities to fuel incremental growth and
invest in new technology solutions, including AI-driven automation,
while further diversifying our business for greater resilience. We
look forward to welcoming Sterling’s talented employees to First
Advantage and implementing best practices from both organizations
to better address the needs of applicants and employers of all
sizes and across all verticals.”
“We are excited to be combining with First Advantage to
accelerate Sterling’s strategic goals and deliver added value for
our company, shareholders, clients, and employees,” said Josh
Peirez, Chief Executive Officer of Sterling. “We look forward to
offering clients a broader suite of solutions, while maintaining
the excellent service they have come to expect. Importantly, this
transaction delivers immediate value to Sterling shareholders, as
well as the opportunity to participate in the compelling, long-term
upside potential of a combined company that is positioned better
than ever to serve the dynamic needs of our customers.”
Certain entities advised by or affiliated with Goldman Sachs
& Co. LLC., which own approximately 52.8% of Sterling’s
outstanding shares, entered into a support agreement pursuant to
which they have delivered a written consent approving the
transaction. CDPQ is an investor in one of these entities.
“Goldman Sachs and CDPQ are very pleased with Sterling’s
performance over the last eight years. Josh has been an outstanding
leader and partner, growing the business, and successfully bringing
the company to the public markets. We are excited by the
transformational opportunity offered by combining with First
Advantage,” said Adrian Jones, Global Chairman & Co-Head of the
Private Equity business within Goldman Sachs Asset Management.
Following the closing of the transaction, Scott Staples will
continue to serve as Chief Executive Officer of First Advantage.
Josh Peirez, Sterling’s Chief Executive Officer, will be offered a
seat on the First Advantage Board of Directors. First Advantage
will continue to be headquartered in Atlanta, GA.
Transaction Details
The transaction consideration is comprised of approximately $1.2
billion in cash and 27.15 million shares of First Advantage common
stock. Under the terms of the agreement, Sterling shareholders will
elect to receive either $16.73 in cash or 0.979 shares of First
Advantage common stock for each Sterling share. The shareholder
election will be subject to proration, resulting in approximately
72% of Sterling’s shares being exchanged for cash consideration and
28% being exchanged for First Advantage common stock. The $16.73
per share consideration represents a premium of 35% to Sterling’s
closing price of $12.42 on February 28, 2024, and a 26% premium to
Sterling’s 30-day volume weighted average price (VWAP). Sterling
shareholders are expected to own approximately 16% of the combined
company after closing, and current First Advantage shareholders
will own approximately 84%.
First Advantage intends to fund the cash portion of the
transaction and retire existing Sterling debt through the issuance
of $1.8 billion of new debt and the use of balance sheet cash.
First Advantage has secured fully committed financing from Bank of
America, N.A., Barclays Bank PLC, Bank of Montreal, Jefferies
Finance LLC and Royal Bank of Canada.
The transaction has been unanimously approved by the Boards of
Directors of both companies.
The transaction is expected to close in approximately the third
quarter of 2024, with the closing and timing thereof subject to
required regulatory approvals, clearances, and other customary
closing conditions.
Advisors
J.P. Morgan Securities LLC acted as lead financial advisor to
First Advantage. BofA Securities, Inc., Barclays Bank PLC, BMO
Capital Markets Corp., Jefferies Finance LLC and RBC Capital
Markets also served as financial advisors to First Advantage.
Simpson Thacher & Bartlett LLP served as First Advantage’s
legal counsel in the transaction.
Goldman Sachs & Co. LLC and Citigroup Global Markets Inc.
acted as financial advisors to Sterling. Fried, Frank, Harris,
Shriver & Jacobson LLP served as Sterling’s legal counsel in
the transaction.
Conference Call and Webcast
Information
First Advantage will host a conference call to review its fourth
quarter and full year 2023 results and discuss details of the
Sterling acquisition today, February 29, 2024, at 8:30 a.m. ET.
The call will be webcast live on the Company’s investor
relations website at https://investors.fadv.com under the “News
& Events” and “Events & Presentations” sections, where
related presentation materials will be posted before the conference
call.
Following the conference call, a replay of the webcast will be
available on the Company’s investor relations website,
https://investors.fadv.com. Alternatively, the live webcast and
subsequent replay will be available at
https://event.on24.com/wcc/r/4450900/D4362414C8BAE251D42253413CDB11CB.
About First Advantage
First Advantage (NASDAQ:FA) is a leading
provider of employment background screening, identity, and
verification solutions. First Advantage delivers innovative
services and insights that help customers manage risk and hire the
best talent. Enabled by its proprietary technology, First Advantage
helps companies protect their brands and provide safer environments
for their customers and their most important resources: employees,
contractors, contingent workers, tenants, and drivers.
Headquartered in Atlanta, Georgia, First Advantage performs screens
in over 200 countries and territories on behalf of more than 30,000
customers. For more information about First Advantage, visit its
website at https://fadv.com/.
About Sterling Check Corp.
Sterling (NASDAQ:STER) is a leading provider of background and
identity services, helping over 50,000 clients create people-first
cultures built on a foundation of trust and safety. Sterling’s
tech-enabled services help organizations across all industries and
regions establish great environments for their workers, partners,
and customers. With operations in North America, Europe, the Middle
East, Asia Pacific, and Latin America, Sterling conducts more than
100 million annual searches. For more information about Sterling,
visit its website at https://www.sterlingcheck.com/.
No Offer or Solicitation
This communication is for informational purposes only and is not
intended to and does not constitute, or form a part of, an offer,
invitation or the solicitation of an offer or invitation to
purchase, otherwise acquire, subscribe for, sell or otherwise
dispose of any securities, or a solicitation of any vote or
approval in any jurisdiction, pursuant to the proposed transaction
or otherwise, nor shall there be any sale, issuance or transfer of
securities in any jurisdiction in which such sale, issuance or
transfer of securities would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
No offering of securities shall be made, except by means of a
prospectus meeting the requirements of Section 10 of the Securities
Act of 1933, as amended.
Additional Information about the Merger and Where to
Find It
In connection with the proposed transaction, First Advantage
Corporation ("First Advantage”) intends to file with the SEC a
registration statement on Form S-4 that will include an information
statement of Sterling Check Corp. (“Sterling”) and that also
constitutes a prospectus of First Advantage. Each of First
Advantage and Sterling may also file other relevant documents with
the SEC regarding the proposed transaction. This document is not a
substitute for the information statement/prospectus or registration
statement or any other document that First Advantage or Sterling
may file with the SEC. The information statement/prospectus (if and
when available) will be mailed to stockholders of First Advantage
and Sterling. INVESTORS AND SECURITY HOLDERS OF FIRST ADVANTAGE AND
STERLING ARE URGED TO READ THE REGISTRATION STATEMENT, INFORMATION
STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS THAT MAY BE
FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO
THESE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY IF AND WHEN THEY
BECOME AVAILABLE BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and security
holders will be able to obtain free copies of the registration
statement and information statement/prospectus (if and when
available) and other documents containing important information
about First Advantage, Sterling and the proposed transaction, once
such documents are filed with the SEC through the website
maintained by the SEC at www.sec.gov. Copies of the documents filed
with the SEC by First Advantage will be available free of charge on
First Advantage’s website at https://fadv.com/ or by contacting
First Advantage’s Investor Relations department at
investors@fadv.com. Copies of the documents filed with the SEC by
Sterling will be available free of charge on Sterling’s website at
https://www.sterlingcheck.com/ or by contacting Sterling’s Investor
Relations department at IR@sterlingcheck.com.
Forward-Looking Statements
This release and any documents referred to in this release
contain forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended (the “Securities
Act”), and Section 21E of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), and it is intended that all
forward-looking statements that Sterling or First Advantage make
will be subject to the safe harbor protections created thereby.
Forward-looking statements can be identified by forward-looking
terminology such as “aim,” “anticipate,” “believe,” “continue,”
“could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,”
“potential,” “predict,” “projection,” “seek,” “should,” “will” or
“would,” or the negative thereof or other variations thereon or
comparable terminology. In particular, statements that address
Sterling’s and First Advantage’s future performance, business
strategy, future operations, estimates and projections of revenues,
losses, costs, expenses, returns, cash flow, and financial
position, anticipated benefits of strategic transactions (including
acquisitions and divestitures), and plans and objectives of
management (including plans for future cash flow from operations),
contained in this release or any documents referred to herein are
forward-looking statements. These statements also include, but are
not limited to, statements regarding the expected benefits of the
proposed transaction to Sterling and First Advantage and each of
their stockholders and the anticipated timing thereof. Sterling and
First Advantage have based these forward-looking statements on
current expectations, assumptions, estimates and projections. Such
forward-looking statements are only predictions and involve known
and unknown risks and uncertainties, many of which are beyond
Sterling and First Advantage’s control. Many factors could cause
actual future events to differ materially from the forward-looking
statements in this release, including but not limited to: (i) the
risk that the proposed transaction may not be completed in a timely
manner or at all, (ii) the failure to satisfy the conditions to the
consummation of the proposed transaction, including the receipt of
certain governmental and regulatory approvals, (iii) the occurrence
of any event, change or other circumstance that could give rise to
the termination of the Merger Agreement, (iv) the effect of the
announcement or pendency of the proposed transaction on Sterling’s
business relationships, operating results, and business generally,
(v) risks that the proposed transaction disrupts current plans and
operations of Sterling or First Advantage and potential
difficulties in Sterling employee retention as a result of the
proposed transaction, (vi) risks related to diverting management’s
attention from Sterling’s ongoing business operations, (vii)
unexpected costs, charges or expenses resulting from the proposed
transaction, (viii) certain restrictions during the pendency of the
proposed transaction that may impact Sterling’s ability to pursue
certain business opportunities or strategic transactions and (ix)
the outcome of any legal proceedings that may be instituted against
First Advantage or against Sterling related to the Merger Agreement
or the proposed transaction. These and other important factors,
including those discussed more fully elsewhere in this release and
in Sterling and First Advantage’s filings with the SEC, including
their respective Forms 10-K, 10-Q and 8-K, may cause actual
results, performance or achievements to differ materially from
those expressed or implied by these forward-looking statements. The
forward-looking statements contained in this release are not
guarantees of future performance and actual results of operations,
financial condition, and liquidity, and the development of the
industry in which each of Sterling and First Advantage operates,
may differ materially from the forward-looking statements contained
in this release. Any forward-looking statement made in this release
speaks only as of the date of such statement. Except as required by
law, neither Sterling nor First Advantage undertakes any obligation
to update or revise, or to publicly announce any update or revision
to, any of the forward-looking statements, whether as a result of
new information, future events or otherwise, after the date of this
release.
First Advantage Contacts
Investors:Stephanie GormanInvestors@fadv.com
Media:Liz Zale / Lindsay MolkFGS
GlobalFirstAdvantage@fgsglobal.com
Sterling Check Corp.
Contacts
Investors:Judah SokelIR@sterlingcheck.com
Media:Angela StelleAngela.Stelle@sterlingcheck.com
Sterling Check (NASDAQ:STER)
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